In the market for automobile insurance,moral hazard implies that
A) those who are insured might take greater risks.
B) those who are uninsured might take greater risks.
C) insured and uninsured alike will take greater risks.
D) screening will have no effect in the market.
E) drivers with greater risks are more likely to buy insurance.

Question

Quizplus · Accepted Answer

Moral hazard in the automobile insurance market occurs when individuals who are insured are likely to take greater risks because they are protected by their insurance policy. This can lead to an increase in accidents and higher insurance premiums for everyone. Therefore, the best choice is A, as those who are insured might take greater risks due to their coverage.

In the Market for Automobile Insurance,moral Hazard Implies That