The moral hazard problem arises primarily because of:
A) Individual bargaining
B) Negative externalities
C) Asymmetric information
D) Poorly defined property rights

Question

Quizplus · Accepted Answer

Moral hazard occurs when one party has more information than the other and is able to take advantage of that information. Asymmetric information is the primary cause of moral hazard, as it allows one party to act in a way that benefits them at the expense of the other party. Individual bargaining, negative externalities, and poorly defined property rights can all contribute to economic inefficiency, but are not the primary cause of moral hazard.

The Moral Hazard Problem Arises Primarily Because Of