In each of the following situations, moral hazard or adverse selection may be present. Indicate which you think is present, if any, and explain your choice. In each of the situations, what could be done to overcome the problem?
A) An insurance company is thinking about issuing health insurance to a firm’s employees.
B) An insurance company has issued health insurance to a firm’s employees on the basis of their medical histories.
C) An investor is asking for a bank loan to support a new business she wants to operate. She is unwilling to submit to a credit check.
D) An investor has purchased shares in a new software company. He is just a shareholder, and is not going to be involved in the daily operations of the firm.
E) A grandfather has just given his grandson $100 as a birthday present.