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Mortal hazard problem and adverse selection problem

Place an 'M' beside the items in the following list that describe a mortal hazard problem and an 'A' beside those that describe an adverse selection problem:

a. A person with a terminally illness buys several life insurance policies through the email.
b. A person drives carelessly because he or she has automobile insurance.
c. A person who intends to "torch" his warehouse takes out large fire insurance policy.
d. A professional athlete who has a guaranteed contract fails to stay in shape during the off-season.
e. A woman who anticipates having a large family takes a job with a firm that offers exceptional child care benefits.

 

Macroeconomics, Economics

  • Category:- Macroeconomics
  • Reference No.:- M9208269

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