“In economics, moral hazard occurs when an individual has anincentive to increase their exposure to risk because they do notbear the full costs of that risk. For example, when a person isinsured, they may take on higher risk knowing that their insurancewill pay the associated costs.â€
One of the topics of chapter 10 is market power andconcentration. In the current economic crisis, many large firmswill receive governments “bailouts.†What is your opinion of thepossibility that government “bailouts†will only increase moralhazard of large firms that are “too big to fail.â€
