Many people smoke and continue poor eating habits because they have health insurance.This example illustrates:
A) moral hazard.
B) signalling.
C) reputation.
D) adverse selection.

Question

Quizplus · Accepted Answer

Moral hazard refers to the tendency for people to engage in riskier behavior when they have insurance or other forms of risk-sharing, because the negative consequences of risky behavior are reduced. In this example, people may continue to smoke and have poor eating habits because they know that their health insurance will cover the costs of any resulting health problems.

Many People Smoke and Continue Poor Eating Habits Because They