(Solved):For car insurance, give an example of behavior that can be called moral hazard and another example of behavior that can be called adverse selection. View Answer…

 

Question

For car insurance, give an example of behavior that can be called moral hazard and another example of behavior that can be called adverse selection.

 

EXPERT ANSWER

Adverse Selection- a person who drives recklessly and gets into accidents often is more likely to get their car insured, leading to a higher risk for the insurer.

Moral Hazard- a person may engage in reckless driving after getting their car insured as they know that

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