The difference between moral hazard and adverse selection is that moral hazard is about:
A. actions that arise after the parties enter an agreement
B. unobserved characteristics of people occurring before parties enter into an agreement.
C. never happens when adverse selection is a problem.
D. None of these statements is true.
Answer: A
You might also like to view...
If 2009 is the reference base period, what is the price index for the CPI basket of goods for 2015 in the above table?
A) 97.3 B) 102.8 C) 128.0 D) zero because the price of Blu-rays fell and the price of water increased
Per capita real GDP levels provide one possible measure of a country's standard of living
Indicate whether the statement is true or false
The possibility that a borrower will break a promise made to the lender after the loan is made is one form of
A) the moral hazard problem. B) the adverse selection problem. C) outside collateral. D) inside collateral.
Long-run average cost is never greater than short-run average cost because in the long run,
A) capital costs equal zero. B) the firm can move to the lowest possible isocost curve. C) wages always increase over time. D) wages always decrease over time.