In a television advertisement for AFLAC supplemental health insurance, an ice skater says to his skating partner, “Do you want to try a triple jump?” She responds, “Why not, I have AFLAC.” This response illustrates the:

A.  principal-agent problem.
B.  adverse selection problem.
C.  moral hazard problem.
D.  free-rider problem.

FOORQUIZ ANSWER:

C.  moral hazard problem.