Which of the following is an example of moral hazard? A) buyer who makes a large

ID: 1123000 • Letter: W

Question

Which of the following is an example of moral hazard?

A) buyer who makes a large raise in bid at an auction to discourage other bidders.

B) doctor who performs a large number of in-office tests and is paid per test.

C) An elderly couple who elect a generous medical insurance policy.

D) board of directors that is trying to refine the compensation system for its CEO.

E) A pitcher (about to sign with a new team) who is aware of a nagging elbow pain.

A) buyer who makes a large raise in bid at an auction to discourage other bidders.

B) doctor who performs a large number of in-office tests and is paid per test.

C) An elderly couple who elect a generous medical insurance policy.

D) board of directors that is trying to refine the compensation system for its CEO.

E) A pitcher (about to sign with a new team) who is aware of a nagging elbow pain.

B) doctor who performs a large number of in-office tests and is paid per test.

Reason

Moral hazard happens when there is incentive for one to behave unethically, here the doctor is doing an unethical work for gain in money.

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