What are some solutions to the moral hazard and adverse selection problems?
The moral hazard problem can be partially solved by making the party that takes the action bear some of the costs of their behavior; for example, a deductible on your insurance policy. Researching the good that you are about to purchase solves the adverse selection problem. The government also provides information and protects against false advertisement. 9. What does the impossibility theorem have to say about using the majority rule for making social choices? The impossibility theorem says that any system (including majority rule) has the potential to provide inconsistent results when used to make decisions that represent the will of a large number of people.
