A Homeowner Discovers That a Large Tree in His Yard

question 106

Multiple Choice

A homeowner discovers that a large tree in his yard is diseased and may fall in a bad windstorm and if it falls, it will likely destroy the garage. The cost to have the tree cut down is significant but the homeowner has an insurance policy and figures that if the tree falls and destroys the garage, the insurance company will pay, and the deductible is less than the cost to have the tree removed. This is an example of:

• A) information symmetry.
• B) adverse selection.
• C) moral hazard.
• D) screening.

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Definitions:

Ordinary People

A term referring to the general populace or individuals who are not distinguished by noble titles, celebrity status, or exceptional achievements.

Realist Movement

An artistic movement originating in the mid-19th century that aimed to depict subjects as they are, focusing on everyday life and society with a critical eye.

Spanish Resistance

The collective efforts and movements within Spain to resist and oppose authoritarian rule, foreign domination, or oppressive policies, notable historically during the Spanish Civil War and other periods.

Third of May, 1808

A painting by Francisco Goya that depicts the execution of Spanish resistors by French soldiers during the Napoleonic Wars.