The problem of moral hazard arises because
a. life is full of all sorts of risks.
b. after people buy insurance, they have less incentive to be careful about their risky behavior.
c. a high-risk person is more likely to apply for insurance than is a low-risk person.
d. insurance companies go to great effort to avoid paying claims to their policy holders.
b
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Which of the following fiscal policy actions would be appropriate if the economy is experiencing an recessionary? gap?
A. a decrease in taxes B. an increase in interest rates C. a decrease in government spending D. a decrease in the money supply
If a product has zero external costs, then
A) marginal social cost equals marginal private cost. B) marginal social cost is greater than marginal private cost. C) marginal social cost is less than marginal private cost. D) marginal social cost equals zero. E) We need more information to determine the relationship between marginal private cost and marginal social cost.
In the foreign exchange market, the quantity supplied of dollars is 300 whereas the quantity demanded of dollars is 500 results in a:
A) balance of payments surplus of 200. B) balance of payments deficit of 200. C) balance of payments surplus of -200. D) balance of payments deficit of -200.
A decrease in the interest rate will_____.
a. increase the quantity of money supplied in the economy b. decrease the quantity of money supplied in the economy c. have no effect on the quantity of money supplied in the economy d. increase the quantity supplied of money at an increasing rate