Consider the following two situations. Irene accepts a job where she will be driving in dangerous traffic, so she seeks auto insurance. After Victor buys health insurance, he visits the gym less frequently. Which of these person's actions illustrates moral hazard?a. Irene's but not Victor'sb. both Irene's and Victor'sc. Victor's but not Irene'sd. neither Victor's nor Irene's

Option C; VICTOR'S BUT NOT IRENE'S.

Explanation:

Moral hazard occurs when someone increases their exposure to risk when insured, especially when a person takes more risks because someone else bears the cost of those risks.

Moral hazard is the idea that a party protected in some way from risk will act differently than if they didn't have that protection. It is a situation in which one party gets involved in a risky event knowing that it is protected against the risk and the other party will incur the cost.

Victor starts to visit the gym less frequently because of the health insurance he purchased; he is exposing himself to risk since he knows someone else will bear the cost, unlike Irene who seeks for auto insurance since she will be driving in dangerous traffic. Therefore, VICTOR'S ACTIONS BUT NOT IRENE'S ILLUSTRATES MORAL HAZARD.