Two years ago, Ayesha did not have health insurance. When she was sick, her only option was to go to an urgent care center and pay $150 out of pocket. Ayesha fell ill three times that year, but each time she waited one week for her symptoms to clear up before heading to the doctor. She ended up visiting the urgent care center only once that year. At the beginning of last year, Ayesha started a new job that provided her with health insurance and allowed her to see a doctor for only $20 per visit. Last year, she again fell ill three times, but went to the doctor all three times, waiting only a day or two after her symptoms began to see the doctor.Ayesha's behavior is an example of:adverse selection.moral hazard.the principal-agent problem.
A)I only
B)II only
C)II and III only
D)I and II only

Question

Quizplus · Accepted Answer

Ayesha's behavior is an example of moral hazard, which occurs when having insurance changes an individual's behavior, leading them to take more risks or utilize more services because they bear less of the cost directly. In this case, Ayesha went to the doctor more often because her out-of-pocket expense was significantly lower with insurance.

Two Years Ago, Ayesha Did Not Have Health Insurance