In health insurance markets, individuals have an incentive to present themselves as healthier as they are,...

In health insurance markets, individuals have an incentive to present themselves as healthier as they are, which can lead to a type of market failure called moral hazard. Question 23 options: True False

Expert Solution

False.

A moral hazard refers to a situation in which a person gets involved in a riskier transaction even by Knowing that a third party will be affected by its consequences.
The basic idea behind this is that people are more ready to take risks if they believe that they do not have to pay cost for their behaviour.
Presenting themselves as healthier as they are does not lead to a moral hazard in health insurance markets.

Rahul Sunny answered 2 years ago

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