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10 - 7 ”Moral hazard” refers to Ca Changes in behavior...

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Unformatted text preview: 7. ”Moral hazard” refers to: Ca) Changes in behavior caused by insurance coverage. 13. Situations in which any decision has undesirable consequences. c. Illegal behavior caused by various policies. (1. The most ’hazardous’ or risky people desire insurance coverage. 8. People are risk—averse, and they desire insurance, because of: @The diminishing marginal utility. of “mag? {)G’ in, am? b. The disutility of uncertainty. c. The threat of financial bankruptcy. d. Prospect theory. 9. "Adverse selection” refers to: a. The most risk-averse people tend to purchase insurance. b. The presence of health insurance causes people to select choices that they would not have made otherwise. orkers with unusually high need for health care tend to purchase insurance. d. Job benefits can be used as a way of avoiding anti—discrimination laws. 10. When there are many firms offering different risks, the ”marriage” between firms and workers can best be described as: a. Employers often require long-term contracts from workers before training them for risky jobs. @Workers select firms that cater to their preferences, and at the same time, these are the cheapest workers that the firm can hire to do their job. c. The implicit price of risk. (1. That’s impossible: marriage is between one man and one woman, not between firms and workers. ...
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