Which of the following best demonstrates the problem of moral hazard ?

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Which of the following best demonstrates the problem of moral hazard ?

A. Josephine doesn’t buy health insurance because it is too expensive, and she is healthy
B. A life insurance company forces Enzo to have a medical examination prior to selling him insurance
C. Enzo drives more recklessly after he buys car insurance
D. Fatima chooses to attend a well-respected college

Which of the following must be true about a signal that is used to reveal private information in order for the signal to be effective ?

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Which of the following must be true about a signal that is used to reveal private information in order for the signal to be effective ?

A. It must be “as seen on TV”
B. It must be free to the signaling party
C. It must be costly to the signaling party but less costly to the party with higher-quality product
D. It must be applied to an inexpensive product

Jamil’s friend dies of a sudden heart attack. Jamil rushes to his doctor for an expensive physical examination. This response demonstrates that ?

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Jamil’s friend dies of a sudden heart attack. Jamil rushes to his doctor for an expensive physical examination. This response demonstrates that ?

A. People give too much weight to a small number of vivid observations
B. People easily change their minds when confronted with new information
C. People enjoy going to the doctor
D. People tend to plan ahead and follow through on their plans

Which of the following is true under pairwise majority rule if people vote for the outcome closest to their most preferred outcome ?

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Which of the following is true under pairwise majority rule if people vote for the outcome closest to their most preferred outcome ?

A. The average preferred outcome wins
B. There is no clear winner due to Arrow’s Impossibility Theorem.
C. The outcome preferred by the median voter wins
D. The outcome preferred by the greatest number of voters wins.