Question 1
Life insurance companies require that prospective policy holders have a medical check‐up before the companies will sell the policy because of a(n) ________ problem in which the insured could be ________ than expected.
◦ moral hazard; healthy and live longer
◦ moral hazard; unhealthy and die sooner
◦ adverse selection; healthy and live longer
◦ adverse selection; unhealthy and die sooner
Question 2
You cause an automobile liability insurance company to face a moral hazard problem when you take ________ driving precautions ________ you buy automobile liability insurance from the company.
◦ fewer; after
◦ more; after
◦ fewer; before
◦ the same; before and after
Cards Used in a Formal Test of Problem Solving
Solution to exponential problem
Problem
Problem
linear programming problem, applying simplex method and sensitivity analysis