Which of the following is not an example of moral hazard as the term is used in the text? O a. the seeking of insurance coverage by those with pre-existing medical conditions. O b.increase in injury claims when workers' compensation benefits are expanded. O c. the construction of homes along a storm-prone shoreline in the belief that government assistance will cover any significant storm damage. O d. the "too-big-to-fail" doctrine which would be used to justify government bailout of large banks might encourage banks to become large "financial supermarkets". O e. a large life insurance policy causes the insured to take up risky "dare-devil" activities. Which of the following explains "market failure" (or non-viability or the "death spiral") of some insurance markets? O a. adverse selection. O b.diminishing marginal utility or benefit. O c. moral hazard O d. consumption-smoothing. Oe, reduced levels of self-insurance." The desire for "consumption- smoothing" is based on the economic principle of O a. diminishing marginal utility (or marginal benefit) O b. the efficiency of perfectly competitive markets. c. asymmetric information. d. supply and demand e. diminishing marginal returns 3.5 point Question 5 Which of the following is not paid for by government funds raised through taxes or government borrowing? O a. Disability insurance. O b.Unemployment insurance. O c. Workers compensation. O d. Medicaid. O e. Social Security.
