41. By requiring that applicants for insurance policies fill out lengthy forms a

Question

41. By requiring that applicants for insurance policies fill out lengthy forms an attempt to guard against: take a physical examination, insurer a. unbounded rationality b. adverse selection. c. negative signaling. d. moral hazard. e. the winner's curse. 42. Raising tax rates: a. provides an added incentive to work. b. provides less incentive for participation in the underground economy. c. always increases total tax revenues. d. leads to less underreporting of income. e. leads to more underreporting of income. 43. A labor union is a group of: a. employees who join together to improve their working conditions. b. firms that join together to hire workers. c. firms that work together to negotiate better prices in the market. d. farmers who work together to receive better prices for their agricultural products e. workers and firm owners who join together to improve working conditions. 44. Other things equal, the supply of labor will be higher to a job that: a. is less prestigious. b. offers fewer nonmonetary rewards. c. provides little on-the-job training. d. is more difficult to perform. e. provides a climate-controlled work environment

Explanation / Answer

1. By acquiring that applicants for insurance policies fill out the lengthy forms and take physical examination, insurer attempts to guard against moral hazard. 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. It arises when both the parties have incomplete information about each other.

2. Raising tax rates leads to more under reporting of income.

3. A labour union is a group of employees who joined together to improve their working conditions. Labour unions are a group of people who represent workers in different occupations, and work to protect the rights of the workers, such as working conditions, and wages.

4. Other things being equal, the supply of labour will be higher to a job that provides a climate controlled work environment.

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