Moral hazard is:
A) when people engage in behavior that is considered highly desirable by the person who bears the cost of the behavior.
B) when buyers and sellers have different information about the quality of a good or the riskiness of a situation.
C) when buyers and sellers with the same information about the quality of a good or the riskiness of a situation agree to a somewhat shady deal.
D) the tendency for people to behave in a riskier way or provide less effort when they do not face the full consequences of their actions.

Question

Quizplus · Accepted Answer

Moral hazard refers to the tendency for people to take risks or make less effort when they know they will not face the full consequences of their actions. This can happen when individuals or institutions are protected from losses or negative outcomes, such as with insurance or bailouts. This behavior can lead to increased risk-taking and ultimately harm individuals or the larger economy.

Moral Hazard Is