Economic:

Question 1

If a contractor is extremely risk averse, which sort of contract would be:

1. A cost sharing contract
2. A cost-plus contract
3. No contract; production first and then a chance to sell the output.
4. A fixed fee contracts

Question 2

Defense conversion can be diffi cult to undertake because:

1- the Pentagon has too much power over Congress.

2- military personnel have no marketable skills.

3- the process of closing military bases is highly politicized because of concerns about hurting local economies.

4- military bases cannot be transformed for any private use.

Question 3

Which of the following is not an example of the moral hazard?

A person only goes to the doctor after finding out that the visit will be covered by insurance.

1. A person is less careful about driving after purchasing collision insurance.
2. A person only buys insurance after finding out that he or she is at high risk.
3. An unemployed worker stays unemployed an extra week, collecting more unemployment insurance.

Question 4

Moral hazard refers to the incentive for

1. people to behave differently with insurance than without it.
2. insurance companies to interpret policies as not covering certain expensive occurrences.
3. hospitals to refuse high-quality care to the indigent.
4. clients to lie to insurance companies with incomplete information.

Question 5

The perceived gain in utility from having insurance coverage can be measured by the

1. maximum premium the consumer would pay minus the expected
2. expected value of the loss being insured against.
3. maximum premium the consumer would pay.
4. premium paid if insurance markets are competitive.