Question

What is the following scenario an example of? Ronny always locked his bike while he was in school, until his parents bought him bike insurance. After that he wasn't as worried about it getting stolen because he now had insurance, so he often forgot to lock it.
A. moral hazard
B. negative externality
C. public good
D. public choice theory

Answer 1

A. moral hazard
lack of incentive to guard against risk where one is protected from its consequences, e.g., by insurance.