Andy does not bother to lock the door to his house because he has theft insurance. This is an example of
A) a positive spillover.
B) moral hazard.
C) adverse selection.
D) irrational behavior.

Question

Quizplus · Accepted Answer

Andy's behavior is an example of moral hazard, which is when an individual takes more risks because they are protected against negative consequences. In this case, Andy is not taking the necessary precautions to protect his home because he knows his theft insurance will cover any losses.

Andy Does Not Bother to Lock the Door to His