Upon buying a car with airbags, Indy begins to drive recklessly. This is an example of the

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

Moral Hazard

Moral hazard occurs when an individual or entity has a tendency to take more risks because the negative consequences of those risks will be partially or fully borne by others.

Airbags

Safety devices in vehicles designed to inflate rapidly in the event of a collision to prevent occupants from striking interior objects or being ejected from the vehicle.

Reckless Driving

Operating a vehicle in a dangerous manner that disregards the safety of others, often resulting in legal penalties.