Individuals may change their behavior after the insurance is bought, so that they behave in a...

Individuals may change their behavior after the insurance is bought, so that they behave in a more high-risk manner than they did before, which problem is this:

A)Moral hazard problem

B)Adverse selection problem

C)Market signaling problem

D)None of the above

Expert Solution

Ans.- Moral hazard problem

Moral hazard is a situation in which one party gets involved in a risky event knowing that it is protected against the risk and the other party will incur the cost. It arises when both the parties have incomplete information about each other.

Rahul Sunny answered 2 years ago

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