Moral hazard is a problem that arises when which situation occurs
A)There is a misunderstanding rising from differences of opinion.
B)There is a hidden characteristic.
C)There is a risk of inappropriate behaviour by one of the parties to a transaction or agreement.
D)There is a risk of a "lemon."

Question

Quizplus · Accepted Answer

Moral hazard occurs when one party to a transaction or agreement behaves inappropriately due to the knowledge that the consequences of their actions will not be fully borne by them. This can occur when there is a lack of transparency or oversight, creating the risk that one party will take excessive risks or engage in other behaviors that benefit them at the expense of the other party.

Moral Hazard Is a Problem That Arises When Which Situation