Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 4.A, Problem 2ARQ
To determine
The reason for licensing.
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Government inspectors who check on the quality of services provided by retailers as well as government requirements for licensing in various professions are both attempts to resolve:a. The moral hazard problem.b. The asymmetric information problem.
Which of the following is an example of moral hazard in the medical industry?
Choose the best answer:
a. A surgeon wants the opportunity to perform for minor ailments
b. Insurance companies and individuals do not openly share information
c. Prices are not transparent or consistent among customers
d. Those with significant health insurance coverage tend to overuse health services
Explain the term adverse selection and moral hazard and show how these lead to market failure
Chapter 4 Solutions
Macroeconomics
Ch. 4.A - Prob. 1ADQCh. 4.A - Prob. 2ADQCh. 4.A - Prob. 3ADQCh. 4.A - Prob. 1ARQCh. 4.A - Prob. 2ARQCh. 4.A - Prob. 3ARQCh. 4.A - Prob. 1APCh. 4 - Prob. 1DQCh. 4 - Prob. 2DQCh. 4 - Prob. 3DQ
Ch. 4 - Prob. 4DQCh. 4 - Prob. 5DQCh. 4 - Prob. 6DQCh. 4 - Prob. 7DQCh. 4 - Prob. 8DQCh. 4 - Prob. 9DQCh. 4 - Prob. 1RQCh. 4 - Prob. 2RQCh. 4 - Prob. 3RQCh. 4 - Prob. 4RQCh. 4 - Prob. 5RQCh. 4 - Prob. 6RQCh. 4 - Use marginal cost/marginal benefit analysis to...Ch. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Prob. 5PCh. 4 - Prob. 6PCh. 4 - Prob. 7P
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- Someone indicated that employee’s absence from work despite meeting the eight hours per day requirement affect productivity and increase cost of business. If an employee makes up the hours by coming early and leaving late, how can you call it an example of moral hazard when the manager can easily correct this behavior? Please explain to the class.arrow_forwarddefine and explain the importance of moral hazardarrow_forwardA Grab driver who does not own the car is very harsh on his driving as he knows that the car is not his. Is this an example of a moral hazard problem? How does moral hazard issue arise?arrow_forward
- How does the presence of asymmetric information in the used car market impact the behavior of buyers, sellers, and market outcomes?arrow_forwardIn the context of asymmetric information, adverse selection and moral hazard, how does marketFailure occur? (Make reference to the insurance or financial market)arrow_forwardPeople drive faster when they have auto insurance. This is an example of: a. Adverse selection. b. Asymmetric information. c. Moral hazard.arrow_forward
- What are some strategies for reducing adverse selection in insurance markets? What sorts of problems do these solutions cause?arrow_forwardCyclists travel faster on their bicycles when wearing helmets. Is this an example of adverse selection or moral hazard?arrow_forwardWhich of the following is NOT an example of moral hazard? an insured person not using preventive care, because he/she is insured against illness an uninsured patient incessantly visiting his doctor because he always thinks he is getting sick an insured person buying prescription shampoo because it covered an insured person getting their teeth whitened because it is coveredarrow_forward
- What would explain why moral hazard might not occur after the large gains in health insurance coverage?arrow_forwardHow do you think the problem of moral hazard might have affected the safety of sports such as football and boxing when safety regulations started requiring that players wear more padding?arrow_forwardWhich of the following is an example of moral hazard? Group of answer choices A. Reckless drivers are the ones most likely to buy automobile insurance. b. Retail stores located in high-crime areas tend to buy theft insurance more often than stores located in low-crime areas. C. Drivers who have many accidents prefer to buy cars with air bags. D. Employees recently covered by the company health plan start going to the doctor every time they get a cold. E. Company divisions try to improve profitability at each other's expense.arrow_forward
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