Question
For the following cases, explain whether they are examples of an adverse selection problem or a moral hazard problem. (2 points each) a. A person
For the following cases, explain whether they are examples of an adverse selection problem or a moral hazard problem. (2 points each)
a. A person with a substance abuse problem applies for auto insurance
b. an individual that has a life insurance policy travels to a country that is embroiled in a civil war
c. a company issues new stock to raise funds for expansion and then uses the funds to pay its executives bonuses
d. a faculty member at NCSU is awarded tenure (a permanent position) and then stops doing research
e. a bank offers to make loans to any NCSU student who applies but at a high interest rate of 15%
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