Moral hazard is more likely to arise when:
A. one side of an economic relationship cannot observe the behavior of those on the other side.
B. adverse selection is present.
C. insurance policies have high deductibles.
D. people are uninsured.
Answer: A
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Refer to the figure above. Which apartment is the best feasible choice for the individual?
A) Apartment 1 B) Apartment 2 C) Apartment 3 D) Apartment 4
A country has a comparative advantage in the production of a good if it can
A) trade off producing the good for another good. B) produce more of the good than another country. C) produce the good on and remain on its production possibilities frontier. D) produce more of the good most efficiently. E) produce the good at the lowest opportunity cost.
Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that marginal cost of the third worker hired is $40, and the average total cost when three workers are hired is $50 . What is the total cost of production when three workers are hired?
a. $50 b. $90 c. $120 d. $150
Which of the following does not describe a characteristic of short-term economic fluctuations?
A. Expansions and recessions are irregular in length and severity. B. Expansions and recessions are felt in only a few sectors of the economy. C. Durable-goods industries are more sensitive to short-term fluctuations than service and non-durable industries. D. The unemployment rate rises during recessions.