MANAGEMENT

Detailed explanation-1: -For example, suppose a person pays insurance for their new phone. Morale hazard arises when the model of their phone becomes outdated, and they no longer care about it. They are indifferent to their phone getting damaged because their insurance would allow them to get a new one.

Detailed explanation-2: -Bad salespeople are being more drawn to commission-based jobs becomes a problem of adverse selection and not a problem of moral hazard as it differentiates types of people, not their actions.

Detailed explanation-3: -The moral hazard problem is when one party in a deal or transaction is more comfortable taking risks, whether physical or financial, because they know that they will not be responsible for any negative consequences but rather the party not taking the risks.

Detailed explanation-4: -Morale hazard, as contrasted with moral hazard, does not imply a propensity to cause a loss but implies a certain indifference to loss simply because of the existence of insurance. For example, an insured’s attitude may be indifferent if a loss occurs because they have insurance.