Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
expand_more
expand_more
format_list_bulleted
Concept explainers
Textbook Question
Chapter 16, Problem 12RQ
What is the problem of moral hazard?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
For the two questions, use the provided Lorenz curve.
Income
100%
Lorenz curve
If the economy's income were distributed according
to the Equality line, what would the Gini coefficient
be?
1
0
0.5
Infinity
80
60
60
60
10
40
If the economy's income were distributed according
to the A line, how much of the economy's income is
earned by the third quintile of families?
60%
40%
20%
100%
20
Equality
0
20%
40
40
A
50
60
80
100
Families
1. For the following utility functions, (i) calculate the MRS, (ii) show whether the MRS is constant, or
diminishing, or increasing, (iii) calculate the degree of homogeneity, (iv) check the convexity of the
Indifference Curve using the condition that for a function to be strict quasi-concave, it must be that
f2f11-2f1f2f12+ ff22 < 0, (v) based on MRS's characteristics, draw an approximate Indifference
Curve, and (vi) comment on the type of utility function.
(a) U(x, y) = 3x + y
(b) U(x, y)=√√x y
(c) U(x, y)=√√x + y
(d) U(x, y)=xy
x+y
A
9R, where
1-b 1-b
Question Two Consider the IS-LM Model. Let the IS equation be Y =
(1b) is the marginal propensity to save, g is the investment sensitivity to interest rates,
and A is an aggregate of exogenous variables. Let the LM equation be Y = +=R, where
k and 1 are income and interest sensitivity of money demand, and Mo is real money balances.
Mo
k k
It is given b
=
0.7, g = 100, A = 252, k = 0.25, l = 200, and Mo 176.
a) Utilize the given numbers to substitute the variables in the model, and then write
down the IS-LM equation system in matrices form.
b) Solve for the equilibrium values of Y and R using Cramer's Rule.
(Note: Keep 2 digits after the decimal point.)
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...
Additional Business Textbook Solutions
Find more solutions based on key concepts
An experimental composite engine block for an automobile will trim 20 pounds of weight compared with a traditio...
Engineering Economy (17th Edition)
Indefinite-Life Intangible Asset Impairment. Genius Auto Malls recently conducted its annual impairment review ...
Intermediate Accounting (2nd Edition)
Quick ratio (Learning Objective 7) 510 min. Calculate the quick assets and the quick ratio for each of the foll...
Financial Accounting, Student Value Edition (5th Edition)
E6-14 Using accounting vocabulary
Learning Objective 1, 2
Match the accounting terms with the corresponding d...
Horngren's Accounting (12th Edition)
Define investors’ expected rate of return.
Foundations Of Finance
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- Suppose that a family's income is exactly the same as the poverty threshold. This family's income deficit would be and their ratio of income to poverty would be 130 0; 1 ○ 1 %3 030 Consider a family of four in 2008, whose poverty threshold is $22,024. If this family's total income was $16544, what would their income deficit be? Income deficit: $arrow_forward3. Based on the 'Compensation Wage Differentials,' (CWD) answers the next questions: In an economy where workers only have two options in their daily lives: work in firm 1 and be at home. The next equation gives the labour supply for the firm 1, Ls¹(w) = -40 + w. a) How much is it willing to pay worker number 10 to stay at home? b) If a new firm (firm 2) is hiring in this market, and its supply of labour is Ls²(w) = -80+ w. Which firm (1 or 2) is considered an ‘uncomfortable' workplace? c) What is the CWD for the firm considered an ‘uncomfortable' workplace when it wants to hire employee number 10? d) Two industries require workers with the same characteristics (skills and experience). Industry B is recognized as having much more hazardous working conditions than Industry A. What is the CWD between the two industries? Industry A Industry B Demand Supply 5 10 15 20 25 5 10 15 20 Labor (Hours) Labor (Hours) Demand Supplyarrow_forwardWhat percentage of the total population is categorized as belonging to the second quintile? Give your responses as whole numbers. The data in the table characterizes the income distribution for a country. Income category first quintile Share of income Cumulative share of (%) income (%) 7.0 second quintile 15.0 22.0 third quintile 45.0 fourth quintile 29.0 fifth quintile 26.0 percentage of population in second quintile: % What percentage of the total income for the country is earned by the third quintile? percentage earned by the third quintile: % What is the cumulative share of income earned by the poorest 80% of the population? percentage earned by the poorest 80%: ୪୧arrow_forward
- 1. Comment on the following ideas. You can say if they are true, false, or uncertain and argue your answers. a) Producers in competitive markets have incentives to reduce the quality of their products and the safety of their workplaces and to cheat consumers and workers generally. b) Labour unions raise the wages of all workers. c) Increasing the minimum wage will reduce employment in every type of market d) In a monopoly market, the demand for good Q shifts to the left, declining Q's price. However, because the monopoly short-run equilibrium is different from the perfect competition equilibrium, its demand for labour is unaffected.arrow_forward2. a) The Value of the Marginal Product of Labour in a local bakery is VMPL = 20 – 0.5L, where "L" is the number of workers. If workers' wages are $10 per hour, how many will the bakery hire? b) What is the economic meaning of the value -0.5?arrow_forwardQuestion One a) Calculate the determinant of matrix A. Show your work in steps: A = 2013-2 - -2 1 3 2 -1 1 0 1 2 3 3-12 4 -3 1 1 3 2 0 b) Prove row linear independence is necessary and sufficient to column linear independence in the same matrix. c) Derive the inverse matrix of matrix B. Show your work in steps: [3 20 01 4 300 B = 0 0 6 5 LO 0 7 6]arrow_forward
- Analyze replacing a commercial oven with $800 annual maintenance and a $3,000 salvage value with a new one for $15,000 and $300 annual maintenance. The company's MARR is 12% per year.arrow_forwardPlease correct answer and don't used hand raitingarrow_forwardPlease correct answer and don't used hand raitingarrow_forward
- Percentage of income 100 80 88 60 60 40 40 20 - - #2 #3 - #4 0 20 40 60 80 100 Percentage of populationarrow_forwardPercentage of income 100 80 88 60 60 40 40 20 - - #2 #3 - #4 0 20 40 60 80 100 Percentage of populationarrow_forwardQuintile A B Poorest 10.5 2.5 Second 13.2 6.8 Middle 21.6 13.9 Fourth 26.4 24.2 Richest 28.3 52.6arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of MicroeconomicsEconomicsISBN:9781305156050Author:N. Gregory MankiwPublisher:Cengage LearningEconomics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
- Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, IncPrinciples of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax
Principles of Microeconomics
Economics
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Principles of Economics 2e
Economics
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:OpenStax