Which of the following is the best explains the moral hazard problem?
A)Chronically ill people are more likely to purchase health care insurance.
B)Only owners of poor quality used cares put them up for sale.
C)People who are highly risk-averse are less likely to invest in the stock market.
D)Drivers with airbags in their cars drive a little more recklessly.

Question

Quizplus · Accepted Answer

The moral hazard problem arises when a party takes more risks or behaves recklessly because they are insured or protected against the consequences of their actions. In this case, drivers with airbags may feel more protected and therefore drive a little more recklessly because they know they have the safety cushion of the airbag.

Which of the Following Is the Best Explains the Moral