Alex has comprehensive car insurance, which covers the cost of repairs if his car is damaged in an accident. As a result, he drives more recklessly,…
CA Foundation · Business Economics · PYQS · September 2025
Alex has comprehensive car insurance, which covers the cost of repairs if his car is damaged in an accident. As a result, he drives more recklessly, knowing that his insurance will cover any damages, Over time, he gets into more accidents and files more insurance claims due to his careless driving. This scenario illustrates which of the following concepts?
Suggested Answer and Working Notes:
Correct Answer: Option (A)
A. Moral Hazard
Topics: Public Finance
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