Suppose a fiRm Offers Its Workers a Cafeteria Plan in Which

question 102

Multiple Choice

Suppose a firm offers its workers a cafeteria plan in which it allows workers to allocate a set amount of fringe benefit money toward specific insurance. Mary, who has five kids needing braces, selects
The family dental coverage. This is an example of the

• A) free-rider problem.
• B) principal-agent problem.
• C) adverse selection problem.
• D) moral hazard problem.

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Definitions:

Local Optimum Solution

A solution to an optimization problem that is better than or equal to all nearby solutions but not necessarily the best overall, or global, solution.

Nonlinear Optimization Models

Mathematical models where the objective function or any of the constraints are nonlinear, used for solving complex real-world problems.

Emergency Rooms

Hospital departments designed to provide immediate medical treatment to patients with acute illnesses or injuries.

General Integer Variables

Variables in mathematical models that can take only integer values, often used in optimization problems.