Foundations of Economics, Student Value Edition Plus MyLab Economics with eText -- Access Card Package (8th Edition)
8th Edition
ISBN: 9780134641843
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 12, Problem 4IAPA
To determine
To provide:
An example of private information possessed by a hockey player who wants a no-trade clause. Whether a hockey player who is in a long-term contract with no trade clause can cause moral hazard and problem of adverse selection to the team.
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26) If an employee receives health insurance through his or her employer, the employer
A) still withholds contributions for Medicare and Medicaid from the employee's paycheck.
B) still withholds contributions for Medicare, but not Medicaid, from the employee's paycheck.
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D) is no longer required to withhold contributions for Medicare or Medicaid from the employee's paycheck.
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A) Individuals are allowed to opt out of the insurance program if they can prove they have no serious health issues and do so before the act fully takes effect in the year 2014.
B) By 2016, fines for not having health insurance will be the greater of $695 per person or 2.5 percent of income.
C) Beginning in 2014, individuals who do not…
20-2 A collogue tells you that he can get a business loan from the bank, but he rates seem very high for what our collogue considers a low risk loan.
Give an adverse selection explanation for this, and offer advice to your friend on how to solve the problem.
Give moral hazard explanation for this, and offer advice to your friend on how to solve the problem.
19-3. You sell bicycle theft insurance. If bicycle owners do not know whether they are high or low risk consumers. there an adverse selection problem?
Chapter 12 Solutions
Foundations of Economics, Student Value Edition Plus MyLab Economics with eText -- Access Card Package (8th Edition)
Ch. 12 - Prob. 1SPPACh. 12 - Prob. 2SPPACh. 12 - Prob. 3SPPACh. 12 - Prob. 4SPPACh. 12 - Prob. 5SPPACh. 12 - Prob. 6SPPACh. 12 - Prob. 7SPPACh. 12 - Prob. 8SPPACh. 12 - Prob. 9SPPACh. 12 - Prob. 10SPPA
Ch. 12 - Prob. 11SPPACh. 12 - Prob. 1IAPACh. 12 - Prob. 2IAPACh. 12 - Prob. 3IAPACh. 12 - Prob. 4IAPACh. 12 - Prob. 5IAPACh. 12 - Prob. 6IAPACh. 12 - Prob. 7IAPACh. 12 - Prob. 8IAPACh. 12 - Prob. 9IAPACh. 12 - Prob. 1MCQCh. 12 - Prob. 2MCQCh. 12 - Prob. 3MCQCh. 12 - Prob. 4MCQCh. 12 - Prob. 5MCQCh. 12 - Prob. 6MCQCh. 12 - Prob. 7MCQ
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Similar questions
- Using an appropriate graph explain how tax exemption affects insurance coverage.arrow_forwardParticipate in a discussion regarding private information as shown in Section 12.3 in the textbook. Signaling occurs when an informed person takes actions that send information to uninformed persons. The grades and degrees that a university awards to students are signals. They inform potential (uninformed) employers about the abilities of the candidates they are considering hiring. What actions (signals) do you plan to take with your existing or potential employers after receiving your college degree?arrow_forwardHow might adverse selection make it difficult for an insurance market to operate?arrow_forward
- For each of the following purchases, say whether you would expect the dogma of imperfect information to be relatively high or relatively low: Buying apples at a roadside stand Buying dinner at the neighborhood restaurant around the comer Buying a used laptop computer at a garage sale Ordering flowers over the internet for your friend in a different cityarrow_forwardHow can deductibles, copayments, and coinsurance reduce moral hazard?arrow_forwardCompare and contrast the ideas of 'caveat emptor'and 'caveat vendor.'When looking at consumer protection, which of these terms would be favored by the Market Approach? Which one does the theory of Social Care support? Which one (emptor or vendor) do you feel consumers and businesses should be following? Why?arrow_forward
- What are some strategies for reducing adverse selection in insurance markets? What sorts of problems do these solutions cause?arrow_forward25. Which of the following is the best example of a moral hazard problem? Question 25 options: a) A borrower uses the proceeds of a business loan to gamble at a Las Vegas casino. b) A borrower decides to borrow at a fixed rather than a variable interest rate. c) A bank has difficulty in distinguishing between good and bad credit risks. d) A borrower makes all of her payments despite a downturn in her business.arrow_forwardUsing Freakonomics Chp. 2 Explain how such innovations as the Internet have affected the prevalence of information asymmetries. 6. Explain how information asymmetries facilitated the corporate scandals that occurred in the early 2000s. 7. Explain how the choice of terms a real estate agent uses to describe a particular property conveys additional information about the property, and hence the price a potential buyer might be able to successfully offer the seller. 8. Choose some evidence from Ch. 2 that illustrates how the combination of an information asymmetry and fear can lead to inefficient outcomes. Explain how the introduction of the element of fear makes the problem of the information asymmetry even worse. 9. Identify the evidence the authors offer to support their claim that real estate agents exploit an information asymmetry to their client’s detriment. 10. According to the voting data from the Weakest Link, which two groups of people are most likely to be discriminated…arrow_forward
- Someone indicated that employee’s absence from work despite meeting the eight hours per day requirement affect productivity and increase cost of business. If an employee makes up the hours by coming early and leaving late, how can you call it an example of moral hazard when the manager can easily correct this behavior? Please explain to the class.arrow_forwardBoth types of insurance customers receive the same insurance policy. Choice 1 of 2:True Choice 2 of 2:Falsearrow_forward
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