Question

The basic idea behind moral hazard is that ________.

a. some economic transactions impose an additional cost on society
b. people do not reveal their true preference for goods that are non-excludable in consumption
c. some economic transactions give rise to an additional benefit to society
d. people tend to take more risks if they do not have to bear the costs of their behavior

Answer 1

Answer: people tend to take more risks if they do not have to bear the costs of their behavior

Explanation:

Moral hazard is a form of reckless behavior by an individual who doesn't directly bear the cost of the reckless behavior.

Moral hazard takes several forms like the examples of : polluting waters with chemicals, throwing refuse into drainage, mismanagement of public amenities.