Example of moral hazards and adverse selections

Question

Use the figure below to answer the following question. Let I represent Income when healthy, let I represent income when ill. Let E [I] represent expected income for a given probability (p) of falling ill. Utility у в ULI income Is есте IM The actuarially fair & partial contract is represented by Point X × OB A Y

Answer 1

Question

Chapter 14, Problem 5PA

Subpart (a):

To determine

Example of moral hazards and adverse selections

Subpart (b):

To determine

Examples of moral hazards and adverse selection.

Subpart (c):

To determine

Example of moral hazard.

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