Question

Fred was suffering from a nasal tissue blockage that could be corrected either through an operation or with medical treatment for about two months. Fred's doctor clearly told him that the condition was not acute and he did not need surgery. Fred, however, insisted on the surgical removal of the blockage, being aware that his medical insurance would cover the entire cost of this surgery. The situation described here can be associated with which of the following problems? A) Price dispersionB) Moral hazardC) Lemons problemD) Prisoner's dilemma

Answer 1

The correct answer to the following question will be Option B (Moral hazard).

Step-by-step explanation:

Moral hazard happens whenever one individual takes further chances as the responsibility of such consequences rests with somebody else.

• Fred suffered from some kind of blockage of the nasal tissues that could have been resolved for around 2 months either by a procedure and via medical attention. Fred's doc warned him plainly the problem wasn't serious so he doesn't need an operation.
• However, Fred concentrated on either the blockage becoming surgically removed, becoming mindful that his private policy would fund the full cost of this operation.

The other given options are not related to the given scenario. So that the condition outlined here could be related to the "Moral hazard" issue.