The classic example of moral hazard is the
A)market for used cars.
B)market for new houses.
C)relationship between a buyer and a seller.
D)relationship between a worker and his employer.

Question

Quizplus · Accepted Answer

Moral hazard occurs when one party takes on risk because they know they won't have to bear the full consequences. In the relationship between a worker and employer, a worker might shirk responsibilities because they know they won't face the full consequences, exemplifying moral hazard.

The Classic Example of Moral Hazard Is the