Moral hazard describes a scenario in which:
A) behaving morally produces a negative consequence.
B) people behave more risky or renege on agreements when they do not face the full consequences of their actions
C) people behave in a riskier fashion because they don't understand the consequences of their actions.
D) when people behave morally they put themselves in a hazardous situation.

Question

Quizplus · Accepted Answer

Moral hazard refers to the situation in which people behave more recklessly or take more risks when they do not bear the full cost or consequences of their actions. For example, if an individual knows that an insurance policy will cover any losses resulting from their risky behavior, they may be more likely to take those risks because they are not personally responsible for the consequences. This creates a moral hazard problem because it can lead to inefficient outcomes and potentially negative consequences for society.

Moral Hazard Describes a Scenario in Which