After a person buys insurance for his car, he will generally not care for his car as much as he otherwise would. This is an example of:

Question

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Moral hazard refers to the tendency of an individual to take risks or act irresponsibly because he is protected from the consequences of his actions. In this case, the person knows that his car is insured and he will not face significant financial loss in case of damage or loss of the car, so he may not take as much care of the car as he otherwise would.

After a Person Buys Insurance for His Car, He Will