Consider John, who purchases an insurance policy on a racquetball racket that he has acquired.He then proceeds to hit his racket against the wall every time he losses a point .This is an example of

Question

Quizplus · Accepted Answer

John's behavior of hitting his racket against the wall is a deliberate action that increases the likelihood of damage to the racket, and he may not bear the full cost of repairing or replacing the racket due to the insurance policy. This demonstrates a moral hazard problem, where the presence of insurance alters John's behavior, leading to increased risk-taking.

Consider John, Who Purchases an Insurance Policy on a Racquetball