A government introduces a fully subsidized coastal relief fund that guarantees to cover 100% of the reconstruction costs for any residential property damaged by coastal erosion or storms. Following the implementation of this policy, property owners in these high-risk areas stop maintaining private sea-defence barriers and increasingly construct additional seaside extensions.
This situation is an example of:
Market signaling
Adverse selection
Moral hazard
Symmetric information
11 exam-style questions on OCR A Level Economics Information failure. Each one has a worked solution and a mark scheme showing where the marks go.