Do you think that this provides a moral argument for

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Do you think that this provides a moral argument for redistributing income from the rich to the poor? Does it prove that income should be so redistributed? Answer Arguments like this are frequently used to justify redistributing income and form part of people’s moral code. Most people would argue that the rich ought to pay more in taxes than the poor and that the poor ought to receive more state benefits than the rich. The argument is frequently expressed in terms of a pound being worth more to a poor person than a rich person. It does not prove that income should be so redistributed, however, unless you argue (a) that the government ought to increase total utility in society and (b) that it is possible to compare the utility gained by poor people with that lost by rich people – something that is virtually impossible to do. ( What details does an insurance company require to know before it will insure a person to drive a car? Answer
56 Chapter 4 Age; sex; occupation; accident record; number of years that a licence has been held; motoring convictions; model and value of the car; age of the car; details of other drivers.
57 Chapter 4 Page 99 (Box 4.4) How will the following reduce moral hazard? (a) A no-claims bonus. (b) You having to pay the first so many pounds of any claim. (c) Offering lower premiums to those less likely to claim (e.g. lower house contents premiums for those with burglar alarms). In the case of (a) and (b) people will be more careful as they would incur a financial loss if the event they were insured against occurred (loss of no-claims bonus; paying the first so much of the claim). In the case of (c) it distinguishes people more accurately according to risk. It encourages people to move into the category of those less likely to claim (but it does not make people more careful within a category: e.g. those with burglar alarms may be less inclined to turn them on if they are well insured!). If people are generally risk averse, why do so many people around the world take part in national lotteries? Because the cost of taking part is so little, that they do not regard it as a sacrifice. They also are likely to take a ‘hopeful’ view (i.e. not based on the true odds) on their chances of winning. What is more, the act of taking part itself gives pleasure. Thus the behaviour can still be classed as ‘rational’: i.e. one where the perceived marginal benefit of the gamble exceeds the marginal cost. 100 1. Why are insurance companies unwilling to provide insurance against losses arising from war or ‘civil insurrection’? Because the risks are not independent. If family A has its house bombed, it is more likely that family B will too. 2. Name some other events where it would be impossible to obtain insurance. Against losses on the stock market; against crop losses resulting from drought. 102 Although indifference curves will normally be bowed in toward the origin, on odd occasions they might not be. Which of the diagrams correspond to which of the following?

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