Don't use ai to answer I will report your answer Solve it Asap with explanation and calculation For each item, decide if it describes a moral hazard problem or an adverse selection problem.a. A person with a terminal illness buys several life insurance policies through the mail.(Click to select)b. A person drives carelessly because she has automobile insurance.(Click to select)c. A person who intends to torch his warehouse takes out a large fire insurance policy.(Click to select)d. A professional athlete who has a guaranteed contract fails to stay in shape during the off season.(Click to select)e. A person who anticipates having a large family takes a job with a firm that offers exceptional child care benefits.(Click to select)Adverse selectionMoral hazard

Moral HazardMoral hazard occurs when one party engages in riskier behavior because they are…

Answered: For each item, decide if it describes a…

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter3: Your Role As A Consumer

Section: Chapter Questions

Problem 1AA

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Example: Lemons Problem You are buying a used car and according the Blue Book the value of the car you want to buy is between $30,000 and $35,000. a. How much are you willing to pay for the car if you think the seller knows as much as you about the quality of the car? b. How much are you willing to pay for the car if you think the seller knows you do? about the car than @gmail.co
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Imagine you are the mayor of a town and you are trying to decide if you should pay for a fireworks show. Your staff survey your 400 citizens who say that they each value a fireworks show at $10. The fireworks show only costs $3,000 so you put on the show but when you ask for donations to pay for the fireworks you only receive $25 total. What does this result show? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. You staff's survey must have overestimated the value of a fireworks show. b The fireworks cost must have been greater than their economic benefit. The firework show suffered from the Tragedy of the Commons problems d The town's citizens were free-riders.
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Place an “M” beside the items in the following list that describe a moral hazard problem and an “A” beside those that describe an adverse selection problem a. A person with a terminal illness buys several life insurance policies through the mail. b. A person drives carelessly because she has automobile insurance. c. A person who intends to torch his warehouse takes out a large fire insurance policy. d. A professional athlete who has a guaranteed contract fails to stay in shape during the off season. e. A woman who anticipates having a large family takes a job with a firm that offers exceptional child care benefits.
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