A person starts practicing poisonous snake charming after signing ...

[genevieve1028]

A person starts practicing poisonous snake charming after signing a contract with a health insurance company. This is an example of
 
  A) moral hazard.
  B) adverse selection.
  C) signaling.
  D) screening.

Question 2

Assume the market demand for wheat may be written as
 
  Q = 45 - 2p + 0.3Y + 1pb
  where Y refers to income and pb refers to the price of barley. Assuming that wheat and barley both sell for 1, and income is 20, calculate the price elasticity, cross price elasticity and income elasticity for wheat.

[GCabra]

Answer to Question 1

A

Answer to Question 2

First, solve for Q = 45 - 2(1 ) + .3(20 ) + 1(1 ) = 50.
Then price elasticity = -2(1/50 ) = -0.04.
Cross price elasticity = 1(1/50 ) = 0.02.
Income elasticity equals .3(20/50 ) = .12.