Andrew leaves the washer, dryer, and dishwasher running at home when he leaves for his music class. Being aware that the recently bought fire insurance for his house will cover any damage caused by fire, he considers himself risk free. Which of the following problems is described in this example?

Question

Andrew leaves the washer, dryer, and dishwasher running at home when he leaves for his music class. Being aware that the recently bought fire insurance for his house will cover any damage caused by fire, he considers himself risk free. Which of the following problems is described in this example?​

Quizplus · Accepted Answer

This is an example of moral hazard, as Andrew is taking risks because he knows that any damage caused by fire will be covered by insurance, leading him to behave in a more careless manner.

Andrew Leaves the Washer, Dryer, and Dishwasher Running at Home