In the United States a government agency known as FEMA(Federal Emergency Management Agency)pays out funds to areas and people affected by natural disasters.Following Hurricane Sandy,which flooded the low-lying parts of lower Manhattan,FEMA paid out funds to help pay for damages in the area.There is currently a proposal to construct a unit complex on the Outer Banks in South Carolina.This is an area that is likely to be increasingly affected by flooding and hurricanes due to climate change.Knowing FEMA will be there to protect owners in the event of a future natural disaster,no plans are made to install additional protections measures for the unit complex.

Answer the following questions:

1. How would the presence of FEMA affect the likelihood of the project going ahead?__________.Type in D for decrease,R for remains the same,C for increase,or U for unable to tell.
2. The aboveanswer demonstrates the occurrence of which economic concept?______________.Type inM for Moral hazard,P for Principal agent issue,C for Competitive market,L for Lemons Model,A for Adverse selection.
3. If FEMA decidesto only protect people who build in areas unlikely to be hit by naturaldisasters,what economic problem would FEMA be attempting to reduce?__________.Typein M for Moral hazard,P for Principal agent issue,L for Lemons Model,Afor Adverse selection.