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) signalling.

Question

Quizplus · Accepted Answer

When an individual has more information about their own actions than others, it can result in moral hazard, which is the tendency for people to take more risks or engage in more harmful behavior when they know they won't bear the full cost of their actions. The distortion of incentives can lead to this type of behavior. Adverse selection, screening, and signaling all relate to situations where there is incomplete information, but they do not specifically involve a distortion of incentives.

When an Individual Knows More About His or Her Own