When an individual knows more about his or her own actions than other people do,incentives are distorted,which causes:
A)moral hazard.
B)adverse selection.
C)screening.
D)signaling.

Question

Quizplus · Accepted Answer

When an individual knows more about his or her own actions than others do, they may take risks or behave in ways that others would not approve of, knowing that they will not face the consequences alone. This is called moral hazard, and it can cause incentives to be distorted, leading to potentially undesirable outcomes. Adverse selection, screening, and signaling are not necessarily related to this specific problem of information asymmetry.

When an Individual Knows More About His or Her Own