How do adverse selection and moral hazard affect the market for insurance?
What will be an ideal response?
Both adverse selection and moral hazard drive up the price of insurance. People with a higher probability of the insurable outcome are the ones who buy the insurance (adverse selection), and having insurance increases the probability of the insurable outcome occurring because the person no longer tries as hard to avoid the outcome (moral hazard). Adverse selection and moral hazard may drive the price up so much that some people don't want to buy the insurance.
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When the price level rises from 110 to 115, the aggregate level of GDP supplied rises from $80 billion to $120 billion
This ________ relationship represents the ________ relationship between the quantity of real GDP firms are willing to supply and the price level. A) positive; short-run B) negative; short-run C) positive; long-run D) negative; long-run
If the numerical value of the price elasticity of demand is 3, then a one-percent change in price will cause a(n)
a. larger percentage change in quantity demanded, so demand is elastic b. larger percentage change in quantity demanded, so demand is inelastic c. smaller percentage change in quantity demanded, so demand is elastic d. smaller percentage change in quantity demanded, so demand is inelastic e. equal percentage change in quantity demand, so demand is unitary elastic
The minimum efficient scale is the output at which the long-run average cost curve becomes horizontal.
Answer the following statement true (T) or false (F)
Which of the following represents the law of supply?
A) An increase in the price of a good causes an increase in the supply of that good. B) An increase in the price of a good causes a rightward shift of the supply curve for that good. C) An increase in the price of a good causes an increase in the quantity supplied of that good. D) all of the above