Moral hazard is an important concern of insurance arrangements because the existence of insurance
A) provides increased incentives for risk taking.
B) is a hindrance to efficient risk taking.
C) causes the private cost of the insured activity to increase.
D) creates an adverse selection problem but no moral hazard problem.
A
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Refer to Table 18-8. The tax system is
A) regressive throughout all levels of income. B) progressive throughout all levels of income. C) progressive between $10,000 and $12,000 of income and regressive between $12,000 and $22,000. D) proportional throughout all levels of income.
According to the text, why would firms in an industry follow the price leadership of another firm?
a. fear of retribution from the price leader if they don't follow b. smaller firms do not have the resources to determine optimal price c. the price chosen by the leading firm is the optimal one for all d. profit will be distributed in accordance with firms' market share e. every firm in the industry has confidence the leading firm will act for the benefit of all firms