The tendency of those who are insured to take more risks as a result is a problem of:
A)free riding.
B)moral hazard.
C)adverse selection.
D)positive externalities.

Question

The tendency of those who are insured to take more risks as a result is a problem of:
A)​free riding.
B)​moral hazard.
C)​adverse selection.
D)​positive externalities.

Quizplus · Accepted Answer

Moral hazard refers to the tendency of those who are insured to take more risks as a result. The presence of insurance reduces the perceived cost of risky behavior, leading to increased risk-taking. This can create problems for insurance companies, as it means they may end up paying out more claims than they had anticipated.

The Tendency of Those Who Are Insured to Take More