Which of the following is an example of moral hazard?
A)There are likely more cars of low quality than of high quality offered for sale without warranties in the used car market.
B)An individual who eats well and exercises regularly chooses not to purchase health insurance.
C)An individual drives less cautiously after obtaining automobile insurance.
D)A car salesman offers a full warranty on a used car for 90 days.

Question

Which of the following is an example of moral hazard?
A)​There are likely more cars of low quality than of high quality offered for sale without warranties in the used car market.
B)​An individual who eats well and exercises regularly chooses not to purchase health insurance.
C)​An individual drives less cautiously after obtaining automobile insurance.
D)​A car salesman offers a full warranty on a used car for 90 days.

Quizplus · Accepted Answer

Moral hazard occurs when one party behaves in a riskier way because someone else bears the costs of that risk. In this case, an individual drives less cautiously after obtaining automobile insurance, knowing that the insurer will bear the costs of any accidents.

Which of the Following Is an Example of Moral Hazard