ESSENTIALS OF ECONOMICS
11th Edition
ISBN: 9781260225334
Author: SCHILLER
Publisher: RENT MCG
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Chapter 9, Problem 5QFD
To determine
To Find: The reason for which an individual is not willing to pay for protective service and check the profitability if it could be in the private market.
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Once a private information is made public and it is immediately reflected in the price, then the market is a strong form of market efficiency.
True or False?
Compare 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?
"Using the example of driving a car, explain moral hazard"
Chapter 9 Solutions
ESSENTIALS OF ECONOMICS
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- Cyclists travel faster on their bicycles when wearing helmets. Is this an example of adverse selection or moral hazard?arrow_forwardAssuming no transaction costs, which legal rule best harnesses private information to deal with externalities? A. A liability rule B. A property rule C. An inalienability rule D. Criminalizationarrow_forwardWhy do insurance companies have to charge such a high premium, which limits the number of consumers that can afford their services? a) Sellers of insurance have access to more information than buyers of insurance b) Buyers of insurance have more information than sellers of insurance c) There are too many regulations in insurance markets d) They are affected by positive externalities from other markets Please correct and incorrect answer explanation Note:- Please don't simply copy and paste content from other AI tools or bots, or else I may have to downvote your actions. Do not provide the handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.arrow_forward
- Why are taxes, one traditional remedy for negative externalities, less than ideal for smoking cessation in the United States? Nicotine is addictive/demand is inelastic, and smokers are mostly poor, so in effect cigarette taxes reduce the quality of life of people we’re trying to help without substantially reducing smoking Demand is inelastic, and smokers are mostly rich, so they don’t reduce smoking as a result of taxes Demand is elastic, and smokers are mostly old, so taxes reduce smoking but cause increased anxiety among the elderly Demand is elastic, and smokers are mostly young, so they quit smoking but are then more likely to experiment with illegal drugsarrow_forwardgive an example of an existing economic interaction that exhibits moral hazard. describe the setting and talk about efficiency considerations.arrow_forwardWhich other devision-making strategies can be applied in the public sectorarrow_forward
- How does asymmetric information lead to a market failure? Essayarrow_forwardWhat public policy approach would be most reasonable to protect consumers from harmful products? How might market and economic forces play a role in protecting consumers?arrow_forwardWhat are the perceived private costs and benefits of taking a COVID vaccine from the perspective of the following groups? (These will likely differ by group but there can be costs and benefits for both groups). Do these benefits outweigh the costs for each group? a. People willing to take the vaccine. b. Vaccine-hesitant individuals.arrow_forward
- In the health insurance market, moral hazard occurs when A.) chronically ill people refuse appropriate medical treatment. B.) chronically ill people buy insurance. C.) patients sue their doctor. D.) chronically ill people cannot buy insurance. E.) providers overtreat patients..arrow_forward20. When a moral hazard problem exists for automobile driving, the marginal cost of driving (A) is lowered, and the amount of driving done is raised above the efficient level. (B) is lowered, and the amount of driving done is lowered below the efficient level. (C) is raised, and the amount of driving done is raised above the efficient level . (D)is raised, and the amount of driving done is lowered below the efficient level. (E) is raised above the efficient level, but market forces keep the total amount of driving is kept at the efficient level .arrow_forwardExplain how moral Hazard can lead to market failure.arrow_forward
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