| Question | 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 he or 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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| Subject | business-economics |
