Which of the following would be an example of a moral hazard problem?
A) A person in poor health who purchases life insurance
B) A person who is taxed on the purchase of a carton of cigarettes
C) A person who purchases auto insurance and then drives more recklessly
D) A person who receives a subsidy from the Federal government to insulate a home

Question

Quizplus · Accepted Answer

Moral hazard occurs when one party takes greater risks or engages in dangerous behavior because they know that another party will be responsible for the financial consequences. In the case of reckless driving, the individual may be more likely to take risks since they know their auto insurance will cover any damages.

Which of the Following Would Be an Example of a Moral