Recall the Application about how having car insurance affects driving behavior to answer the following question(s).
-Recall the Application.What does the theory of moral hazard suggest when it comes to car insurance among insured and uninsured drivers?
A) The insured driver, who bears less than the full cost of a collision, will drive less carefully than the uninsured driver.
B) The insured driver, who bears more than the full cost of a collision, will drive more carefully than the uninsured driver.
C) The insured driver, who bears less than the full cost of a collision, will drive more carefully than the uninsured driver.
D) The uninsured driver, who bears less than the full cost of a collision, will drive less carefully than the insured driver.

Question

Quizplus · Accepted Answer

The theory of moral hazard suggests that individuals who are insured and therefore bear less than the full cost of a collision will tend to be less careful, as they do not face the full financial consequences of their actions. This leads to riskier behavior compared to uninsured drivers, who bear the full cost of their actions.

Recall the Application About How Having Car Insurance Affects Driving