An insurance company provides liability insurance to a restaurant protecting the owner against claims from customers. One area of coverage is protection against food poisoning claims. The insurance company may periodically send an employee into the restaurant to observe food preparation and food storage processes. The insurance company is trying to avoid:
A. transaction costs.
B. moral hazard.
C. adverse selection.
D. free riding.
Answer: B
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The attempt to capture consumer surplus, producer surplus, or economic profit is called ________
A) a natural monopoly B) price discrimination C) rent seeking D) gouging
Rick withdraws $500 from his savings account, keeps $100 as currency, and deposits $400 in his checking account
A. M1 increases by $400 and M2 decreases by $500. B. M1 does not change, but M2 decreases by $500. C. M1 does not change, but M2 decreases by $400. D. M1 increases by $500 and M2 does not change.
Governments invest in infrastructure to:
A. to increase the productivity of businesses. B. to spur economic growth. C. to increase the growth rate of GDP per capita. D. All of these are reasons why the government provides infrastructure.
When aggregate demand exceeds current production
A. both output and the price level are in equilibrium. B. output is not in equilibrium, but the price level is. C. prices are not in equilibrium, but output is. D. neither output nor the price level is in equilibrium.