Curt borrowed money from a bank to purchase a fishing boat. He purchas

Curt borrowed money from a bank to purchase a fishing boat. He purchased property insurance on the boat. Curt had difficulty making loan payments because he did not catch many fish, and fish prices were low.

Curt intentionally sunk the boat, collected from his insurer, and paid off the loan balance. This scenario illustrates the problem of
A) adverse selection.
B) moral hazard.
C) nondiversifiable risk.
D) attitudinal hazard.

ANSWER

Answer: B