Moral hazard alters the ability of markets to allocate resources efficiently.D gives the demand for automobile driving.With no moral hazard,the marginal cost of transportation MC is $1.50 per mile,the driver drives 100 miles, Which is the efficient amount.With moral hazard,the driver perceives the cost per mile to be MC'=$1.00 and drives 140 miles. Moral hazard alters the ability of markets to allocate resources efficiently. D gives the demand for automobile driving. With no moral hazard, the marginal cost of transportation MC is $1.50 per mile; the driver drives 100 miles, Which is the efficient amount. With moral hazard, the driver perceives the cost per mile to be MC' = $1.00 and drives 140 miles