Final answer:
The term for a situation that presents the possibility of a loss is 'risk.' Risks can occur due to events like natural disasters or economic turmoil, and moral hazard is a related issue where insured parties may take greater risks than when they are uninsured. The correct answer is option c.
Step-by-step explanation:
The situation that presents the possibility of a loss is referred to as risk. Risk can arise through various circumstances, which individuals often have limited control over. An example of risk could involve economic risks such as a natural disaster, war, or massive unemployment in a country, where citizens want assurances for the well-being of themselves and their families.
Moral hazard is a related concept where individuals or businesses might engage in riskier behaviours when they have insurance protection, contrary to their behaviour when uninsured.
For instance, people might be less vigilant about their health if they know their insurance covers doctor visits, or a company may reduce safety measures because losses through theft or fire would be covered by insurance. This effect of insurance fostering less cautious behaviour represents the moral hazard problem.