Which of the following is an example of moral hazard?
A)A car salesman earns a commission of 10 percent on every car sold.
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.
E)A person brings a mechanic to check a used car before buying it.

Question

Quizplus · Accepted Answer

Moral hazard occurs when individuals behave differently due to insurance or other protection. In this case, the individual drives less cautiously after obtaining automobile insurance, which increases the risk for accidents and insurance payouts.

Which of the Following Is an Example of Moral Hazard