6. Answer which happens, moral hazard or adverse selection, or nothing happens under each ofthe following situations.[M20]: A driver drives a car rough because s/he has a property insurance of a car.b. Adverse selection[M21]: Since a driver cannot distinguish among qualities of cars, s/he may buy a bad one.a. Moral hazardc. nothinga. Moral hazardb. Adverse selectionc. nothing[M22]: Banks look for lenders, but most customers who apply for loans seem to havedifficulty repaying them even in assuming they make an identical effort.a. Moral hazardb. Adverse selectionc. nothing

In economics and finance, "risk is the uncertainty associated with any outcome. Risk refers to the…

6. Answer which happens, moral hazard or adverse selection, or nothing happens under each of the following situations. [M20]: A driver drives a car rough because s/he has a property insurance of a car. a. Moral hazard b. Adverse selection c. nothing [M21]: Since a driver cannot distinguish among qualities of cars, s/he may buy a bad one. b. Adverse selection a. Moral hazard c. nothing [M22]: Banks look for lenders, but most customers who apply for loans seem to have difficulty repaying them even in assuming they make an identical effort. a. Moral hazard b. Adverse selection c. nothing

6. Answer which happens, moral hazard or adverse selection, or nothing happens under each of the following situations. [M20]: A driver drives a car rough because s/he has a property insurance of a car. a. Moral hazard b. Adverse selection c. nothing [M21]: Since a driver cannot distinguish among qualities of cars, s/he may buy a bad one. b. Adverse selection a. Moral hazard c. nothing [M22]: Banks look for lenders, but most customers who apply for loans seem to have difficulty repaying them even in assuming they make an identical effort. a. Moral hazard b. Adverse selection c. nothing

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter8: Market Failure

Section: Chapter Questions

Problem 10P

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Similar questions

In an insurance system, would you expect each person to receive in benefits pretty much what they pay in premiums or is it just that the average benefits paid will equal the average premiums paid?
How can moral hazard lead to more costly insurance premiums than one was expected?
1)Describe an example of moral hazard that we may run into in the real world. Think of something that is legal and not inherently lethal, yet still demonstrates elevated risk for the participant who would likely act safer if insurance or protection was not available. Explain why someone might take this risky action. What are the benefits to the risky behavior? In your response to two of your peers, explain what an insurance company may do to reduce the likelihood that an individual would take this risk. Keep in mind, that we cannot always just deny coverage if an individual is participating in the risky behavior.
1. We should expect to see more people in a group to purchase insurance as the probability of illness ___________ and the costs of an illness ____________.