Asked by
Sourav Bansal
on Oct 09, 2024
Verified
Because the federal government typically provides disaster relief to farmers,many farmers do not buy crop insurance even through it is federally subsidized.This illustrates:
A) the adverse selection problem.
B) the moral hazard problem.
C) the special interest effect.
D) logrolling.
Disaster Relief
Assistance provided to individuals, businesses, and communities affected by natural or human-made disasters, aiming to help them recover.
Crop Insurance
Insurance that farmers can purchase that will pay out if crop selling prices or crop revenues fall below predetermined values.
Moral Hazard
A situation where one party takes greater risks because they do not have to bear the full consequences of their actions.
- Clarify the distinction between adverse selection and moral hazard in the sphere of economic activities.
- Recognize the impact of government interventions, such as subsidies, on market behaviors and outcomes.
Verified Answer
KP
Learning Objectives
- Clarify the distinction between adverse selection and moral hazard in the sphere of economic activities.
- Recognize the impact of government interventions, such as subsidies, on market behaviors and outcomes.