The Moral-Hazard Problem Occurs When

Multiple Choice

The moral-hazard problem occurs when:

A) a consumer of insurance changes his or her behavior in such a way as to decrease the probability of a payoff.
B) a consumer of insurance changes his or her behavior in such a way as to increase the probability of a payoff.
C) insurance companies change their behaviors in such a way as to increase the probabilities of a payoff.
D) insurance companies change their behaviors in such a way as to decrease the probabilities of a payoff.
E) none of the above.