Balance between the Cost and Benefit of Pollution Control - Assignment Example

It is the duty of the business that they have to clean the environment if they have created pollution. But the cost paid by the business to clean the environment should not exceed the benefits obtained by the creation of pollution. This means that there should be a balance between the cost and benefits of pollution control. If the business is asked to pay more than the benefits it has obtained, this request will become inefficient for the business and the business will close.

Moral hazard is a term used to describe a situation when an individual takes an action knowing that it will not negatively impact him but will negatively impact others and the individual himself experiences profitability out of this decision. Moral hazards are experienced by the insurance sector of the health industry, although the difference in information exists in different parts of the health industry, it impacts the insurance sector in the worst possible manner (Taylor 484). Due to the asymmetry of information, insurance fails to realize the real risk they are taking in insuring an individual. Adverse selection affects health insurance companies because the best plans offered by the companies are usually purchased by those who are terminally ill and such plans cost more money to insurance companies.