Which of the following is an application of the moral-hazard problem?
a. a person buying insurance after a cancer diagnosis.
b. an salesperson who is not paid on commission being rude to customers.
c. coffee hounds buying the menu item meant for lower-demand consumers.
d. only inexperienced workers applying for a managerial job advertised with a relatively low salary.
Question 2
An example of adverse selection is
a. purchasing a new car sight unseen based on the recommendation of a neighbor.
b. high health-insurance premiums resulting from the poor health of people who buy policies.
c. suppliers who charge more for better quality clothing than for lower quality clothing.
d. being talked into buying a low-quality item because the price is lower.
Traction is the application of a pulling force to maintain bone alignment during fracture healing. D
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Markets and Institutions Market Story Problem