Question

Match the following:

1.

The only one who buy burglary insurance are those who have flimsy locks on their doors.

2.

Ask for a discount and you’ll get one. Otherwise you’ll pay full price.

3.

The market structure if only two major players end up dominating the health care market in

Atlanta

Choices: (One is not used.)

a.

Moral hazard

b.

Adverse selection

c.

Oligopoly

d.

Price discrimination

Answer 1

1) Moral hazard occurs when person with insurance tends to bear less amount of risk. The only one who buy burglary insurance are those who have flimsy locks on their doors such that insurance company will bear the cost. It is an example of moral hazard.

2) Price discrimination occurs if producer can charge different price from different consumers. Ask for a discount and you’ll get one. Otherwise you’ll pay full price is an example of price discrimination.

3) Oligopoly occurs when there are few firms dominating in the market. Thus, The market structure if only two major players end up dominating the health care market in Atlanta is oligopoly.