It would be costly to provide wage insurance because of the ________ problem.

A) moral hazard
B) adverse selection
C) Texas hedge
D) actuarial error

Wage Insurance

A form of financial protection that provides workers with a portion of their earnings difference if they lose their job and find a new one at a lower wage.

Moral Hazard

A situation in which one party is more likely to take risks because they do not bear the full consequences of their actions, often due to asymmetric information or where one party is protected in some way from the risks they take.