An example of moral hazard is
A)A taxi driver paid per mile taking the shortest route
B)a piece-rate garment worker shirking less than a per hour worker
C)an hourly salesman working harder than a commission salesman
D)an author on contract going to as many book signings as one with a percentage royalty rate

Question

​An example of moral hazard is
A)​A taxi driver paid per mile taking the shortest route
B)a piece-rate garment worker shirking less than a per hour worker
C)an hourly salesman working harder than a commission salesman
D)​an author on contract going to as many book signings as one with a percentage royalty rate

Quizplus · Accepted Answer

Moral hazard occurs when a party is more likely to take risks because the negative consequences are borne by another party. In this case, a piece-rate garment worker has less incentive to shirk compared to a per hour worker, who might take advantage of being paid regardless of output.

​An Example of Moral Hazard Is

An Example of Moral Hazard Is