How does moral hazard affect market outcomes?
It's a matter of incentives. Buying a good may give the buyer reason not to behave as it did before the purchase. For example, if you rent a car, you may not take as much care with it as you would if it were your own. The result may be higher car repair costs and this eventually translates into higher rental prices. Economists call this negative outcome moral hazard.
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Refer to the scenario above. Which of the following will be true if Alice stops the auction at $30,000?
A) She will earn zero consumer surplus. B) She will earn a consumer surplus of $5,000. C) She will earn a consumer surplus of $30,000. D) She will earn a consumer surplus of $16,000.
The percentage of American families with incomes below the poverty line was ________ in 1960 and ________ in 2010
A) 10.1%; 10.7% B) 8.7%; 13.9% C) 18.1%; 11.8% D) 26.8%; 48.3%
Assume that two countries are considering trading with each other for the first time. Also assume that one of the countries has an absolute disadvantage in producing everything compared to the other country
How would it still be possible for these two nations to benefit from trade with each other?
The form of business organization with the most flexibility of management is the
a. sole proprietorship. b. partnership. c. corporation. d. cooperative.