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Discussion Questions:
- Externalities and the Environment
Meyer describes the “Tragedy of the Commons.” The IMF article explains how this type of problem is an example of an “externality.” Â What is an externality? What might be a good government policy to solve the problem of the environmental externality that leads to high greenhouse gas emissions?
- Moral Hazard and Adverse Selection
“Moral hazard” is a term often used in the context of peoples’ behavior once they have insurance. Â Szuchman and Anderson explore the idea of moral hazard in personal relationships. How would you define moral hazard? Provide an example of a moral hazard that you have observed in your own community or workplace.
How does moral hazard differ from adverse selection? Â Provide an example to illustrate this concept.
