Give an example of adverse selection and an example of moral hazard using homeowners insurance
An example of adverse selection is that someone whose home is in a location prone to theft is more likely to apply for homeowners insurance. An example of moral hazard is that once someone has insurance, he might keep fewer fire extinguishers in the house.
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A player's best response is:
A. a strategy that provides him with a minimum payoff, assuming that other players behave in a specified way. B. a strategy that provides him with the highest possible payoff, assuming that other players behave in a specified way. C. a strategy that provides him with some payoff defined by a probability. D. None of these is correct.
Since 1930, interest payments on past federal government borrowings were the highest in the 1980s and 1990s
a. True b. False Indicate whether the statement is true or false
A consumer is currently spending all of her available income on two goods: music CDs and DVDs. At her current consumption bundle, she is spending twice as much on CDs as she is on DVDs. If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs, what is the price of a CD?
a. $4 b. $8 c. $12 d. $20
The fact that movie star Angelina Jolie's salary is much higher than the salary earned by the world's best nurse can best be explained by the
a. failure of the market to reward talent fairly. b. large number of nurses. c. willingness of some people to accept a lower wage rate in order to do work they find personally rewarding. d. superstar phenomenon.