One way that insurance companies can reduce the moral hazard problem is to:
A. make insurance customers pay a deductible before the company pays on a claim.
B. engage in genetic testing to determine who is more likely to be high risk.
C. eliminate copayments on insurance claims.
D. insure only customers with good morals.
Answer: A
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When a negative externality is present in a market, when a tax is imposed, it is:
A. inefficient, because the net benefit of buying another unit is zero for all market participants. B. efficient, because the net benefit of buying another unit is zero for all market participants. C. efficient, because the government mandates the efficient quantity without regard for net benefits. D. inefficient, because the government mandates the efficient quantity without regard for net benefits.
Why are the governments of developed countries concerned about the quality of education in their countries?
What effect does education play in determining the country's economic growth rate and its standard of living? Why does it have this effect?
Suppose that the Federal Reserve is concerned about rising inflation, so they increase short- term interest rates. How will this affect long-term rates and the yield curve? What does the slope of the yield curve reveal about the effectiveness of the Fed's policy? Explain in the context of the Liquidity Premium Theory.
What will be an ideal response?
Economic progress
A) reflects that people are achieving higher income levels and living standards. B) requires that individuals work longer hours. C) indicates that scarcity is no longer a problem. D) indicates income levels are higher even though environmental and health conditions have worsened.