If an Individual Is Less Careful About Avoiding Accidents or Illness

question 227

Multiple Choice

If an individual is less careful about avoiding accidents or illness because she has health insurance, this is an example of

• A) the free-rider problem.
• B) the moral hazard problem.
• C) the adverse selection problem.
• D) the Coase theorem.

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Definitions:

Capital Balances

The amounts recorded in the equity section of a company's balance sheet, representing the funds contributed by owners plus retained earnings.

Balance Sheet

A financial statement summarizing a company's assets, liabilities, and shareholders' equity at a particular point in time.

Bonus Method

An accounting technique used to record the transactions related to the admission of a new partner into a partnership by revaluing the existing partners' capital accounts.

Profits and Losses

A financial statement that summarizes the revenues, costs, and expenses incurred during a specified period, usually a fiscal quarter or year.