A moral hazard arises when
A. high-risk individuals are unable to find insurance.
B. insurance leads the insured to be less careful.
C. risk-averse individuals purchase insurance.
D. insurers are unable to fully pay legitimate claims.
Answer: B
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Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower
Which of the following is not assumed to be constant along a money demand curve?
a. The price level b. The interest rate c. Real GDP d. Nominal GDP e. Individual's tastes and preferences
Which of the following problems associated with asymmetric information can be avoided by using a product warranty?
a. Lemons problem b. Problem of adverse selection c. Moral Hazard d. Problem of blind sight
Which of the following events would cause the price of oranges to fall?
a. There is a shortage of oranges. b. The FDA announces that bananas cause strokes, and oranges and bananas are substitutes. c. The price of land throughout Florida decreases, and Florida produces a significant proportion of the nation's oranges. d. All of the above are correct.