What is moral hazard?

a. It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction.

b. It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off.

c. It refers to the private, self-interested actions that people pursue, which when taken collectively leads to a loss in economic surplus.

d. It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.

Question

Social Studies

Mya

2 August, 14:00

What is moral hazard?

a. It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction.

b. It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off.

c. It refers to the private, self-interested actions that people pursue, which when taken collectively leads to a loss in economic surplus.

d. It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.

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Answers (1)

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Anastasia Haynes · Answer 1

b. It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off.

Explanation:

Moral hazard -

It occurs when the person increases their exposure to risk in the case, when the other person bears the cost of the risks.

It can occur when the action of one of the party changes due to the detriment of the other after the financial transaction is done.

hence,

The correct answer for Moral Hazard is (b).