Suppose that a provider of health insurance is concerned that a policy holder will eat unhealthy foods during the lifetime of their insurance contract.The insurer faces the problem of ________.

Question

Quizplus · Accepted Answer

Moral hazard is the risk that a policy holder may engage in behavior that could increase the likelihood of a claim, such as consuming unhealthy foods, due to the reduced personal cost of doing so as a result of being covered by insurance.

Suppose That a Provider of Health Insurance Is Concerned That