Question

13) What makes the market for credit so much more complicated than the market for oranges?

a. Supply is not increasing in the price

b. There is no well-defined price for credit

c. Transactions take place over time

d. The demand is nonlinear

14) Which of the following is an example of moral hazard?

a. Consumers with worse health histories are charged higher rates

b. Drivers with car insurance are more likely to speed

c. People with poor vision are more likely to buy vision insurance

d. Insurance companies refuse to sell health insurance to those who are seriously ill

15) Which of the following is an example of adverse selection?

a. Consumers with worse health histories are charged higher rates

b. Drivers with car insurance are more likely to speed

c. People with poor vision are more likely to buy vision insurance

d. Insurance companies refuse to sell health insurance to those who are seriously ill

Answer 1

13. Option B

Explanation: The price is affected by numerous factors such as risks and expectations.

14. Option B

Explanation: In moral hazard, one assumes higher risks as one does not need to face the consequences for the increased risks.

15. Option C

Explanation: In adverse selection, people with high risks are more likely to take insurance against the risk.