Which of the following is not an example of moral hazard?
A) a person with car insurance drives recklessly
B) a pet-sitter being paid to walk a dog for one hour per day only walks the dog for 20 minutes per day
C) a thief steals a car
D) All of the above are examples of moral hazard.

Question

Quizplus · Accepted Answer

Moral hazard refers to the situation where one party takes more risks because they are protected from the consequences of their actions by another party. In option C, the thief stealing a car is not an example of moral hazard as there is no second party involved who is protecting the thief from the consequences of their actions. Options A and B both involve a second party (the car insurance company and the pet owner, respectively) who may be protecting the reckless driver and the lazy pet-sitter from the full consequences of their actions. Therefore, options A and B are examples of moral hazard.

Which of the Following Is Not an Example of Moral