Moral hazard occurs because people act A) in the interest of ...

[acc299]

Moral hazard occurs because people act
 
  A) in the interest of others at all time.
  B) in the best interest of society.
  C) in their own self-interest.
  D) like anarchists.

Question 2

The figure above shows the market for gasoline. The government has imposed a tax on gasoline.
 
  a) What is the amount of the tax per gallon of gasoline? b) How much of the tax is paid by consumers? How much is paid by producers? Which is more elastic, the supply or demand for gasoline?

[vboyd24]

Answer to Question 1

C

Answer to Question 2

a) The tax is 1.50 per gallon, the amount by which the supply curve has been shifted upward.
b) Consumers pay 1 of the tax, as the price they pay rises from 1.50 to 2.50 per gallon. Producers pay 0.50 of the tax, as the price they receive falls from 1.50 to 1.00 per gallon. The supply is more elastic because suppliers pay a smaller fraction of the tax than do buyers.