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 harder than a commission salesman
D)an author on contract going to fewer 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 harder than a commission salesman
D)​an author on contract going to fewer book signings as one with a percentage royalty rate

Quizplus · Accepted Answer

An author on contract with a fixed payment may be less incentivized to promote their book as the payment is already guaranteed, as compared to an author with a percentage royalty rate who stands to gain more from increased book sales. This is an example of moral hazard, where one party takes more risks or acts differently because they are not fully responsible for the consequences.

​An Example of Moral Hazard Is

An Example of Moral Hazard Is