Asked by Valerie Cardenas on Sep 24, 2024
One difference between moral hazard and adverse selection is
A) Adverse selection has to do with unobservable characteristics of individuals
B) Moral hazard has to do with unobservable actions of individuals
C) Adverse selection is individuals change their behaviors because of a contract
D) Only A&B
Moral Hazard
The tendency of a person or entity to take risks because the negative consequences of the risk will be borne by another party.
Unobservable Actions
Actions taken by individuals or entities that cannot be seen or monitored by others, often discussed in the context of economics or game theory.
- Examine the distinctions between adverse selection and moral hazard.
Learning Objectives
- Examine the distinctions between adverse selection and moral hazard.
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