Abby buys health insurance because she knows that she has health risks that wouldn't be obvious to an insurance company. Brad buys home owners insurance and then is less careful to make sure he's put out his cigarettes. The example with Abby
a. and the example with Brad illustrate adverse selection.
b. and the example with Brad illustrate moral hazard.
c. illustrates adverse selection; the example with Brad illustrates moral hazard.
d. illustrates moral hazard; the example with Brad illustrates adverse selection.
c
You might also like to view...
Structural unemployment is:
A. short-term unemployment that is associated with the process of matching workers with jobs. B. the extra unemployment that occurs during periods of recession. C. long-term and chronic unemployment that exists even when the economy is producing at a normal rate. D. the additional unemployment not captured in official statistics resulting from discouraged workers and involuntary part-time workers.
The declared purpose of antitrust policy is to promote competition, yet some would say it actually may prevent competition. Explain the two sides of the debate.
What will be an ideal response?
For a price-taking firm, marginal revenue
A. is the addition to total revenue from producing one more unit of output. B. decreases as the firm produces more output. C. is equal to price at any level of output. D. both a and b E. both a and c
The_____________is the number of units sold multiplied by the average price per unit sold.
Fill in the blank(s) with the appropriate word(s).