Question

1.Which of the following is an example of moral hazard?

Group of answer choices

There are likely more cars of low quality than of high quality offered for sale without warranties in the used car market.

An individual who eats well and exercises regularly chooses not to purchase health insurance.

An individual drives less cautiously after obtaining automobile insurance.

A car salesman offers a full warranty on a used car for 90 days.

2.

The possible returns to a shareholder are:

Group of answer choices

rent and wages.

fixed interest and dividend.

rent and fixed interest.

dividend and an appreciation in the price of the stock.

3.

Why are bonds less risky than stocks?

Group of answer choices

The dividend given on shares is usually less than the coupon-rate on bonds.

Bonds can be issued only by the government whereas shares are issued by private firms.

Bondholders have a claim on the assets of the firm whereas the shareholders do not.

The higher the profit of the firm, the greater the share of the bondholders.

4.

Adverse selection problems in health insurance are reduced by all of the following except:

Group of answer choices

The insurers decide to request a medical examination for new applicants.

The insurers may refuse to offer health insurance to certain people who poses too great a risk.

The insurers decide to exclude certain types of expensive health care products or services from coverage

The insurers decide to charge a riskier person lower premiums than it charges someone likely to have fewer claims

The insurers decide to place an annual limit on the amount of coverage it provides someone.

5.

Which of the following events would shift a labor supply curve?

(i)	immigration of high-skilled workers
(ii)	immigration of low-skilled workers
(iii)	changes in the workers' wage rate

Group of answer choices

(i) and (ii) only

(ii) and (iii) only

(iii) only

(i), (ii), and (iii)

6.

Other things being equal, what happens to labor supply in the pear-picking market when the wage paid to apple pickers decreases?

Group of answer choices

The labor supply will stay unchanged until the wages paid to pear pickers change.

The labor supply will decrease.

The labor supply will increase.

The labor supply may fall or rise, depending on the price of pears.

7.

Scenario 22
Sam has two jobs, one for the winter and one for the summer. In the winter, he works as a lift attendant at a ski resort where he earns $11 per hour. During the summer, he drives a tour bus around the ski resort, earning $13 per hour.

Refer to Scenario 22. During the winter months, what is Sam's opportunity cost of taking an hour off work to go skiing?

Group of answer choices

$13

between $11 and $13

$11

less than $11

John owns a number of hot dog stands in New York City. He hires workers to sell hot dogs at his stands. Which of the following events will lead to an increase in John's demand for hot dog vendors?

Group of answer choices

Hollywood glamorization of a new movie about a hot dog vendor leads hundreds of high-school students in New York City to apply for a job at John's.

The price of hot dogs falls.

The hot dog vendor wages decrease.

The demand curve for hot dogs shifts to the right.

Answer 1

1.An individual drives less cautiously after obtaining automobile insurance.
This is an example of moral hazard. As the individual knows that being protected by insurance the individual is less cautious.

2.dividend and an appreciation in the price of the stock.
Dividend is the share of profit the shareholders get. When a stock is sold in the secondary market it mat fetch a vaule higher than its actual book value.

3.Bondholders have a claim on the assets of the firm whereas the shareholders do not.
When a company is liquified, the bondholders get the first claim of the assets, till their debt is paid.

4.The insurers decide to charge a riskier person lower premiums than it charges someone likely to have fewer claims
This is an example of adverse selection as the person who's money is on the line, does not have control.

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