Identify Whether Any of the Following Situations Is a Moral

question 31

Essay

Identify whether any of the following situations is a moral hazard, adverse selection, or principal-agent problem. Explain your reasoning in each case.
a. A person in poor health purchases life insurance.
b. A consumer is taxed on the purchase of a carton of cigarettes.
c. A driver purchases auto insurance and then drives more recklessly.
d. A computer programmer works from home on a fixed salary.

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Definitions:

Gate Theory of Pain

A theory suggesting that pain signals passing through the spinal cord can be blocked or moderated by gates in the spinal cord, influenced by other peripheral sensory signals and the brain.

Neurons

Specialized cells of the nervous system that transmit signals to different parts of the body, serving as the building blocks of the nervous system.

Electro-Magnetic Spectrum

The range of all types of electromagnetic radiation, from gamma rays, visible light, to radio waves.

Visual Sensations

Perceptions experienced through the sense of sight, including colors, patterns, and movements.