Answer
a)
Moral hazard: People with health insurance are less likely to care for themselves (since the insurance would pay for their health care rather than the person paying out of pocket).
Adverse selection: Sick people are more likely to apply for health insurance than healthy people.
Work Step by Step
b)
Moral hazard: After a driver has insurance, they are more likely to take risks while driving (including being an overall riskier driver).
Adverse selection: A riskier driver is more likely to apply for car insurance than a safe driver.
