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AP® Microeconomics

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Market Failure: Moral Hazard Definition

APMICR-SYXEXS

What is a moral hazard?

A

The market failure that results from a change in the buyer's behavior after a purchase as a result of the buyer's belief that losses will be passed on to the seller.

B

The market failure that results from the seller's inability to exclude individuals who do not pay from benefiting from a product.

C

The problem that results from the differing incentives between employees and business owners that makes employees more likely to engage in shirking behavior.

D

The market failure that results In overproduction because producers of the product pass on some of the costs of production to individuals outside of the production process.

E

The market failure that results in underproduction because one firm has a unique product, and no other firms can enter the industry.