Moral hazard is O A. a stuation in which only bad qualty items are bought and so

Question

Moral hazard is O A. a stuation in which only bad qualty items are bought and sold O B. the tendency for people to enter into agreements in which they can use their private information to their own advantage and O C. an action taken outside a market that conveys information that can be used by that market to the disadvantage of the less informed party D. absent after a person who dislikes nsk buys insurance against the risk O E. when one of the parties to an agreement has an incentive afher the agreement is made to act in a manner that tbrings additional benefts to himself or herself at the expense of the other party

Explanation / Answer

Ans)
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E. when one of the parties to an agreement has an incentive after the agreement is made to act in a manner that brings additional benefits to himself or herself at the expense of the other party.
Moral hazard arises when there is incomplete information.
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D. reduce;differ
The warranty for a lemon is expensive
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E.risky drivers pay a larger premium than do safe drivers for insurance.
Since they are risky they need to pay a higher premium.
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D. a signal
Your score is a signal about your capabilities.

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