An example of moral hazard is
A)A taxi driver paid per mile taking the shortest route
B)a piece-rate garment worker shirking more than a per hour worker
C)an hourly salesman working less hard 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 more than a per hour worker
C)an hourly salesman working less hard 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 an individual has an incentive to take risks because they do not bear the full consequences of their actions. In this case, an hourly salesman may work less hard than a commission-based salesman because their pay is not directly tied to their performance, leading to less motivation to maximize sales.

​An Example of Moral Hazard Is

An Example of Moral Hazard Is