What tradeoffs are present in the moral-hazard-in-insurance problem?
a. Full insurance benefits the risk-averse customer but gives him excessive incentives to take care to avoid harm.
b. Full insurance benefits the risk-averse customer but provides him with no incentive to take care to avoid harm.
c. Full insurance benefits the risk-averse consumers but does not allow the insurer to extract as much surplus from all types.
d. Full insurance is beneficial for all consumers, but if sold at an actuarially fair price for the population will draw only the riskiest types.
b
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How could return-chasing explain why many of Enron's employees lost most of their retirement savings when Enron went bankrupt?
What will be an ideal response?
During the Great Depression, real interest rates
A) rose to unprecedentedly high levels. B) rose only slightly above the long-run trend. C) fell to unprecedentedly low levels. D) fell only slightly below the long-run trend.
Financial Systems
What will be an ideal response?
Refer to Scenario 11.1. Suppose all five ranchers know that their land that Mariana needs is worth a total of $2 million
If each rancher agrees to sell his or her parcel of land to Mariana for $600,000, the logical outcome in this situation is for the railway ________ , and the benevolent social planner is ________. A) to be built; pleased B) to be built; indifferent C) not to be built; unhappy D) not to be built; indifferent