Explain the principal-agent problem and moral hazard

Assignment Help Microeconomics
Reference no: EM13206080

Insurance companies must provide insurance to drivers who may take risks that go unreported because they don't wreck or get ticketed (or if they do wreck or get ticketed, it goes unreported to the insurance company). Briefly explain the principal-agent problem and moral hazard in economic terms.

Reference no: EM13206080

Questions Cloud

Discuss why property rights are an important variable : Briefly discuss the concept of both positive and negative externalities and give specific examples of each. In your explanations of the two, cover the differences, discuss why property rights are an important variable, and discuss any other releva..
What would happen in the market for chicken if the price : Explain what would happen in the market for chicken if the price of beef suddenly increased and remained high. Use supply and demand analysis in your answer and consider the elasticity of demand and the cross-price elasticity of demand.
What mileage will allow you to stay within your budget : a car rents for $35 per day plus .18 per mile you are on a daily budget of $71. what mileage will allow you to stay within your budget?
Estimate the slope of the curve : Estimate the slope of the curve y = f(t) at t = 0 .2 . In principle, what is the relationship between this slope and the instantaneous speed?
Explain the principal-agent problem and moral hazard : Insurance companies must provide insurance to drivers who may take risks that go unreported because they don't wreck or get ticketed (or if they do wreck or get ticketed, it goes unreported to the insurance company).
Find the 99% confidence interval of the mean number : A random sample of 48 days taken at a large hospital shows that an average of 38 patients were treated in the emergency room (ER) per day. The standard deviation of the population is 4.
How many times the mass of earth is the mass of the sun : The mass of Earth is about 6 x 1021 metric tons. The mass of the sun is about 1.998 x 1027 metric tons. About how many times the mass of Earth is the mass of the sun? Express the answer in scientific notation.
What are some of the incentives to consolidate : In a separate group discussion board, present two arguments. The first should argue in favor of the proposed merger, from the perspective of the firms. The second agrues against the proposed merger from the perspective of the broader public intere..
Where the kentucky derby is held the first saturday : The Kentucky Derby is held the first Saturday in May at Churchill Downs in Louisville, KY. The racing track is one and one-quarter miles. The winners since 1990, their margin of victory, the winning time, and the payoff on a $2 bet.

Reviews

Write a Review

Microeconomics Questions & Answers

  Fast food restaurant production function

I believe that fast food restaurants show short run production function because of the one fixed input, capital. But, I need to elaborate more and produce the production function equation Q=F (L,K,M...) Can you please help?

  What will the marginal private benefit be of such upkeep

The marginal private cost (MPC) of such lawn upkeep is represented by the following equation: MPC = 0.5Q, where Q is again the number of hours engaged in lawn upkeep. how many hours of lawn upkeep will occur in this community.

  Explain the important characteristic in perfect competion

Explain the most important characteristic in perfect competition, monopolistic competition, oligopoly, and monopolies and relate the characteristic to how these firms can make profits in the short run. In your analysis, make sure to relate an exa..

  Determining nash equilibrium strategies

Think that the following entry game. Here, company B is an existing company in the market, and company A is a potential entrant. Company A must decide whether to enter the market or stay out of the market.

  Government expenditure in increasing gdp

An increaseing governemtn expenditure in increasing GDP when it is financed by rasing taxes or slling government bonds to the general public or else.

  Find the reorder point

Given the optimal order quantity calculated above, if the average inventory is 136 cartons, then the monthly holding cost is ____ dollars, and the total cost including the cost of supply or the total unit cost for all units, holding and ordering i..

  Analyze monopoly after the tax

A profit-maximizing monopoly faces an inverse demand function described by the equation p(y) = 50 - y and its total costs are c(y) = 10y, where prices and costs are measured in dollars.

  Promote economic activity

During the country's current economic malaise, along with that of our local economy, what can individuals and businesses do to help get by financially, get a job, or promote economic activity?

  Question raised by critics of medical licensure

decrease in your real income that results when photographic equipment you purchase increases in price because of increased demand by others for these items. cost you bear when your neighbor has a noisy party and does not compensate you for your dis..

  Analysis of american public education

Require some good concepts on a solution to the following situations. How can we pay for this solution? Cuts in present programs or new taxes?

  Explain changes in disposable income

Explain the following statement: "Changes in disposable income lead to movements along the consumption function while changes in wealth lead to a shift of the consumption function.

  Investment objective and risk tolerance

Assume you are a broker at an investment advisory company. You and your client disagree on investment decisions he wants you to make decision on his behalf

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd