Because Don has health insurance,he is more likely to see the doctor when he has a cold.This is an example of
A) adverse selection.
B) moral hazard.
C) the lemons problem.
D) both moral hazard and adverse selection.
E) private information.

Question

Quizplus · Accepted Answer

Moral hazard refers to the situation where an individual alters their behavior or takes risks because they are insured or protected against loss. In this case, Don is more likely to see the doctor for a cold because he has health insurance, which reduces his out-of-pocket costs and thus increases his willingness to seek medical attention. This is an example of moral hazard in action.

Because Don Has Health Insurance,he Is More Likely to See