Moral hazard occurs when: A. individuals do not do what is in their own best int

Question

Moral hazard occurs when:

A. individuals do not do what is in their own best interest.

B. an individual knows more about the way things are than other people do

C. an individual has an incentive to violate his or her morals.

D. an individual knows more about his or her actions than other people do.

Stephanie offers to pay Josh $1,000 a year from now if he will lend her money today. Assume that there is no inflation over this period. If Josh wants to earn 10% interest, the maximum amount he will lend Mary is:

A. $909.09

B. $990.09.

C. $90

D. $826.45

Explanation / Answer

1.an individual knows more about his or her actions than other people do

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