Tami knows that people in her family die young, and so she buys life insurance. Preston knows he is a reckless driver and so he applies for automobile insurance
a. These are both examples of adverse selection.
b. These are both examples of moral hazard.
c. The first example illustrates adverse selection, and the second illustrates moral hazard.
d. The first example illustrates moral hazard, and the second illustrates adverse selection.
a
You might also like to view...
In the long run the local coffee shop incurs total costs of $625 when output is 1,250 cups of coffee and $750 when output is 1,500 cups of coffee. For this range of output, the coffee shop exhibits
a. economies of scale. b. constant returns to scale. c. diseconomies of scale. d. efficient scale.
When the Fed makes a discount loan, the impact on the Fed's balance sheet will reflect:
A. a decrease in assets and liabilities. B. an increase in assets and a decrease in liabilities. C. no change in liabilities but an increase in assets. D. an increase in assets and liabilities.
Real and nominal variables are highly intertwined, and changes in the money supply change real GDP. Most economists would agree that this statement accurately describes
a. both the short run and the long run. b. the short run, but not the long run. c. the long run, but not the short run. d. neither the long run nor the short run.
Based on the figure below. Starting from long-run equilibrium at point C, a tax cut that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies. 
A. D; C B. B; C C. B; A D. D; B