Determine whether they represent problems of moral hazard

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Reference no: EM131831413

Determine whether the following situations represent problems caused by asymmetric information. If so, determine whether they represent problems of moral hazard or adverse selection.

a. Unrest in the Middle East causes oil speculators to buy up oil futures, driving gasoline prices higher.

b. Karol is halfway to work before he realizes that he forgot to lock the back door. Because he has renter's insurance, he decides it is not worth being late just to go home to lock the door.

c. Joanne applies for a job as a part-time manager at a fast-food restaurant. Her MBA makes her overqualified for the job, yet the position goes to someone else who doesn't have a college degree.

d. Frances lives in an apartment above a restaurant, and her apartment always smells like burgers and fries. She has tried unsuccessfully to get the restaurant owner to remedy the problem.

e. The potential costs of long-term care (such as a nursing home stay) can be very high and also very uncertain. Despite this, the private market for long-term care in the United States has remained fairly small.

Reference no: EM131831413

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