The text points out that asymmetric information can have deleterious effects on market outcomes. a. Explain how asymmetric information about a hidden action or a hidden characteristic can lead to moral hazard or adverse selection. b. Discuss a few tactics that managers can use to overcome these problems.

Federal law allows workers who leave a job to continue to participate in the health insurance they were receiving through their previous employer. However, they have to pay the full monthly premium (including both the employee and employer portions), as well as a 2 percent administrative fee. This high price has led many people, especially the healthier ones, to drop coverage. Insurance companies report that these plans lose them money.  This phenomenon is an example of: a. Adverse Selection b. Moral Hazard c. Tragedy of the Commons d. Commodity Egalitarianism

25. 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.

Which characteristic is being displayed when you consider all sides of an issue ? Select one : a . Knowledge b . Objectivity c . Expertise d . Honest e . Audience awareness To establish credibility with your audience , you should select one : a . Impress them with a long list of your accomplishments. b . use hedging words ( "may ," " perhaps " ) to demonstrate you're willing to tell your audience what they want to hear . c . be modest and deferential . d . show that you are confident and that you believe in yourself and in your message

Government provided social insurance is most beneficial in the cases where the probability of adverse events is _____ to calculate and the costs of the adverse events are _____. a.hard/low b.easy/high c.easy/low d.hard/high

Which of the following is NOT an example of moral hazard? Joey borrowed $20,000 from a bank to open a coffee shop but he actually spent the money to buy a fancy race car. O A man with a family history of high blood pressure buys a health insurance policy. A homeowner with fire insurance on the house smokes in bed. O A bank with a high leverage carries out reckless investment plans.

Many people in the property and liability insurance industry complain about the “automobile problem.” The “automobile problem” consists of a series of interrelated problems. What factors have combined to produce a problem in the automobile insurance area?

How does moral hazard apply to seat belt laws and helmet laws?