Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 16, Problem 21CTQ
How do you think the problem of moral hazard might have affected the safety of sports such as football and boxing when safety regulations started requiring that players wear more padding?
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Chapter 16 Solutions
Principles of Economics 2e
Ch. 16 - For each of the following purchases, say whether...Ch. 16 - Why is there asymmetric information in the labor...Ch. 16 - Why is it difficult to measure health outcomes?Ch. 16 - Why might it be difficult for a buyer and seller...Ch. 16 - What do economists (and used-car dealers) mean by...Ch. 16 - What are some ways a seller of goods might...Ch. 16 - What are some ways a seller of labor (that is,...Ch. 16 - What are some ways that someone looking for a loan...Ch. 16 - What is an insurance premium?Ch. 16 - In an insurance system, would you expect each...
Ch. 16 - What is an actuarially fair insurance policy?Ch. 16 - What is the problem of moral hazard?Ch. 16 - How can moral hazard lead to more costly insurance...Ch. 16 - Define deductibles, copayments, and coinsurance.Ch. 16 - How can deductibles, copayments, and coinsurance...Ch. 16 - What is the key difference between a...Ch. 16 - How might adverse selection make it difficult for...Ch. 16 - What are some of the metrics economists use to...Ch. 16 - You are on the board of directors of a private...Ch. 16 - A website offers a place for people to buy and...Ch. 16 - How do you think the problem of moral hazard might...Ch. 16 - To what sorts of customers would an insurance...Ch. 16 - Using Exercise 16.20, sketch the effects in parts...
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Similar questions
- What are concerns that some people have with the use of consumer decision nudges by governments?arrow_forwardYou are on the board of directors of a private high school, which is hiring new tenth-grade science teachers. As you think about hiring someone for a job, what are some mechanisms you might use to overcome the problem of imperfect information?arrow_forwardIf people get higher pay from insurance than their premiums. Will this increase or decrease the death rate of average persons? Is this an example of moral hazard or adverse seletion? How will an insurance company deal with these problems?arrow_forward
- If you sell your DVD player on eBay you will be better informed about the quality of the product than any potential buyer. This is called A) adverse selection. B) asymmetric information. C) moral hazard. D) opportunistic behavior.arrow_forwardThe text points out that asymmetric information can have deleterious effects on market outcomes. a. Explain how asymmetric information about a hidden action or a hidden characteristic can lead to moral hazard or adverse selection. b. Discuss a few tactics that managers can use to overcome these problems.arrow_forwardOne method of solving this problem is through signaling. Signaling is a strategy one uses when they have information. The goal is to use a signal to convince the buyer that the good or service that is being sold is quality and will meet the buyer's wants. Offer an example of a company that uses a signal to help sell its product. What is the signal? What information is the signal trying to convey? Do you think the signal is effective? Why or why not? Does this signal improve market efficiency? Why or why not?arrow_forward
- Private markets may underallocate resources to a good or service that is affected by the moral hazard problem because the sellers of the product will not be able to Multiple Choice A. tell which specific buyers may be affected by moral hazard. B. know the degree to which moral hazard may lead any specific buyer to engage in costly behavior. C. both A and B. D. neither A nor B.arrow_forwardWhy do economists say that people tend to be risk-averse?arrow_forwardAnswer with a 1: not a problem of information asymmetry, 2: moral hazard, or 3: adverse selection a. Unrest in the Middle East causes oil speculators to buy up oil futures, driving gasoline prices higher. b. Karol is halfway to work before he realizes that he forgot to lock the back door. Because he has renter’s insurance, he decides it is not worth being late to work just to go home to lock the door. c. Joanne applies for a job as a part-time manager at a fast-food restaurant. Her MBA makes her incredibly overqualified for the job, yet the position goes to someone else who doesn’t even have a college degree. d. Frances lives in an apartment above a restaurant, and her apartment always smells like burgers and fries. She has tried unsuccessfully to get the restaurant owner to remedy the problem. e. The potential costs of long-term care (such as a nursing home stay) can be very high and are also very uncertain. Despite this, the private market for long-term care in the United States has…arrow_forward
- Answer this for me mate. Much appreciated.arrow_forwarda) Suppose an insurance company decides to insure the earnings obtained by a professional tennis player (in the event of an injury), provided she does not engage in activities like skydiving or skiing. Which asymmetric information problem is the insurance company trying to avoid? b) How do insurance companies protect themselves against losses due to adverse selection and moral hazard? c) How do insurance companies price their products to solve the problem of asymmetric information?arrow_forwardWhat are moral hazard and adverse selection? How are they similar, how are they different? What causes each?arrow_forward
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