Which of the following is an example of a moral hazard?

a) You hire a neighborhood teenager to mow your grass once a week over the summer while you are traveling. The teenager mows your grass every three weeks instead.

b) You decide to buy a scalped ticket before a concert, but you are not entirely sure the ticket is legitimate.

c) A contractor takes a long time to finish the construction work he promised after you gave him his final payment.

d) A competitive market for organs would increase the amount of organ transplants.

The correct answer to the given question is option a) You hire a neighborhood teenager to mow your grass once a week over the summer while you are traveling. The teenager mows your grass every three weeks instead.

A moral hazard occurs if there is an information asymmetry between two parties involved in a transaction once the transaction takes place. Among the given options, only option a complies with the definition of moral hazard. In option a, the teenager is working less than what he promised at the time of being hired and this information is not known to the person who hired him.

In the option b, there was information symmetry about the authenticity of ticket before the transaction of buying the ticket took place. Hence, this is a case of adverse selection. In the option c, the information that the contractor is taking longer than what he promised is known to the client and hence it is not a case of information asymmetry. The option d does not show any kind of information asymmetry.