The National Flood Insurance Program (NFIP) provides flood insurance for homeowners and small businesses. The policyholders pay just 10% of the actual cost of flood insurance. When such highly-subsidized insurance is available, people are more likely to build homes in areas subject to sever flood damage. What is this behavior is called? a. Negative externality b. Positive externality c. Adverse selection d. Moral hazard
The National Flood Insurance Program (NFIP) provides flood insurance for homeowners and small businesses. The policyholders pay just 10% of the actual cost of flood insurance. When such highly-subsidized insurance is available, people are more likely to build homes in areas subject to sever flood damage. What is this behavior is called? a. Negative externality b. Positive externality c. Adverse selection d. Moral hazard
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter10: Externalities
Section: Chapter Questions
Problem 1PA
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The National Flood Insurance Program (NFIP) provides flood insurance for homeowners and small businesses. The policyholders pay just 10% of the actual cost of flood insurance. When such highly-subsidized insurance is available, people are more likely to build homes in areas subject to sever flood damage. What is this behavior is called?
a.
Negative externality
b.
Positive externality
c.
Adverse selection
d.
Moral hazard
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