7.A person who buys a life insurance policy pays a certain amount per year and receives for his family a much larger payment in the event of his death. Explain why an economist would expect buyers of life insurance to have higher death rates than the average person using the ideas of moral hazard and adverse selection Only typing answer

Because of the moral hazard problem, a-the government has increased incentive to regulate insurance markets. b-low-risk individuals do not choose insurance. c-the costs of providing insurance decreases. d-full insurance may no longer be efficient.

MB, MC 10- 8. 6 4 2. Reference: Ref 16-2 O MB, Select one: A. III B. I MC MB₁ MB3 (Figure 16.2) Lilly, who owns the Cigar Bar and Grill, is considering whether to purchase fire insurance. Without insurance, the marginal benefit of precautions to reduce the risk of fire is given by MB₁. Which of the following statements is (are) TRUE? I. With full insurance, the marginal benefit of acting to reduce the risk of fire is given by MB3. C. II D. I and III 10 II. If Lilly purchases fire insurance, whether it is full or partial coverage, the marginal benefits of acting to reduce the risk of fire will increase. Quantity of actions taken to improve fire protection III. With partial insurance, the marginal benefit of acting to reduce the risk of fire is given by MB₂.

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