1. Define Adverse Selection. Explain why adverse selection can be problematic in the following insurance markets. 2. Define Moral Hazard. Explain why moral hazard might be a problem for the provision of social insurance. 3. The U.S. federal government definition of poverty is the same in all communities around the country. Is this appropriate? Why or why not? 4. Explain the notion of the "risk premium." 5. The Earned Income Tax Credit (EITC) is a government program for low and moderate income families with working adults. It provides a tax credit to households that have earnings greater than 0 as a percentage of earnings up to a predetermined threshold. Is this program to help poor people social insurance? Why or why not? 6. Explain briefly why theory suggests that, in general, government shouldn't place taxes in markets that have preexisting distortions. Be specific. Give an example where taxes can improve the distortion. 7. Suppose we have the following linear supply and demand curves: Qs = 300 + 50p Qd = 480 10p Government wants to place a $6 excise tax on consumer purchases cigarettes. Calculate the equilibrium prices with and without the tax, and deadweight loss caused by the tax.