Jeff insures his car against theft. Consequently, he rarely locks the car. This

Question

Jeff insures his car against theft. Consequently, he rarely locks the car. This describes the problem of:

A. adverse selection.

B. moral hazard.

C. positive correlation

D. risk aversion.

All of the following are true statements which a problem solver must address when deciding whether to take on a project EXCEPT that:

A. benefits must be compared with costs.

B. explicit costs must be factored in to the decision.

C. implicit costs must be factored in to the decision.

D. the benefits and costs of a project always arrive at the same time.

Jeff insures his car against theft. Consequently, he rarely locks the car. This describes the problem of:

A. adverse selection.

B. moral hazard.

C. positive correlation

D. risk aversion.

All of the following are true statements which a problem solver must address when deciding whether to take on a project EXCEPT that:

A. benefits must be compared with costs.

B. explicit costs must be factored in to the decision.

C. implicit costs must be factored in to the decision.

D. the benefits and costs of a project always arrive at the same time.

Explanation / Answer

1. B. moral hazard.

As Moral hazard is a situation in which one party gets involved in a risky event knowing that it is protected against the risk and the other party will incur the cost.

2.   D. the benefits and costs of a project always arrive at the same time.

As it is not neccessory because one can discount it's value using existing interest rate.

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