The Difference Between Moral Hazard and Adverse Selection Is That

question 10

Multiple Choice

The difference between moral hazard and adverse selection is that moral hazard is about:

• A) unobserved characteristics of people occurring before parties enter into an agreement.
• B) never happens when adverse selection is a problem.
• C) actions that arise after the parties enter an agreement
• D) None of these statements is true.

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Definitions:

Explicit Resource Price

The monetary value that is directly paid for the use of a resource or asset, such as wages for labor or rent for land.

Aggregate Supply Curve

A graphical representation showing the relationship between the total supply of goods and services produced in an economy and the price level.

Price Level

The aggregated mean of prices for all economic goods and services.

Positively Sloped

Describes a line on a graph that rises from left to right, indicating a positive relationship between two variables where an increase in one variable corresponds with an increase in the other.