A car insurance company will give a discount to safer drivers. To get the discount, the car insurancecompany uses a mobile app to monitor speed, acceleration, and cellphone use while driving. Driverswith good behaviors will receive a discount on the premium. What problem is the insurancecompany trying to solve?Moral hazardFree rider problemPrisoners' dilemmaTransaction costs

Given the situation, its a usual tendency for people buying insurance to behave carelessly as they…

A car insurance company will give a discount to safer drivers. To get the discount, the car insurance company uses a mobile app to monitor speed, acceleration, and cellphone use while driving. Driver with good behaviors will receive a discount on the premium. What problem is the insurance company trying to solve? Moral hazard Free rider problem Prisoners' dilemma Transaction costs

A car insurance company will give a discount to safer drivers. To get the discount, the car insurance company uses a mobile app to monitor speed, acceleration, and cellphone use while driving. Driver with good behaviors will receive a discount on the premium. What problem is the insurance company trying to solve? Moral hazard Free rider problem Prisoners' dilemma Transaction costs

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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John wants to buy a used car. He knows that there are two types of car in the market, plums and lemons. Lemons are worse quality cars and are more likely to break down than plums. John is willing to pay £10, 000 for a plum and £2, 000 for a lemon. Unfortunately, however, he cannot distinguish between the two types. Sellers can offer a warranty that would cover the full cost of any repair needed by the car for y ∗ years. Considering the type and likelihood of problems their cars can have, owners of plums estimate that y years of guarantee would cost them 1000y, owners of lemons estimate that the cost would be 2000y. John knows these estimates and decides to offer £10, 000 if a car comes with y ∗ years of warranty, £2, 000 if a car comes without warranty. For which values of y ∗ is there a separating equilibrium where only owners of plums are willing to offer the y ∗ -years warranty? Clearly explain your reasoning.
The Tucker family has health insurance coverage that pays 80 percent of out-of-hospital expenses after a deductible of $1,000 per person. If one family member has doctor and prescription medication expenses of $2,200, what amount would the insurance company pay?
Federal law allows workers who leave a job to continue to participate in the health insurance they were receiving through their previous employer. However, they have to pay the full monthly premium (including both the employee and employer portions), as well as a 2 percent administrative fee. This high price has led many people, especially the healthier ones, to drop coverage. Insurance companies report that these plans lose them money. This phenomenon is an example of: a. Adverse Selection b. Moral Hazard c. Tragedy of the Commons d. Commodity Egalitarianism
Moral hazard is consistent with the idea that when people have health insurance that protects against high medical expenses, they tend to get sick more often. seek less medical care. get sick less often. seek more medical care.
25. Which of the following is the best example of a moral hazard problem? Question 25 options: a) A borrower uses the proceeds of a business loan to gamble at a Las Vegas casino. b) A borrower decides to borrow at a fixed rather than a variable interest rate. c) A bank has difficulty in distinguishing between good and bad credit risks. d) A borrower makes all of her payments despite a downturn in her business.
If the provision of medical insurance encourages people to take more health risks because they know they can receive treatment, then health insurance Multiple Choice produces an asymmetric information problem. leads to a universal access problem. causes a defensive medicine problem. creates a moral hazard problem.
Alana wishes to obtain auto insurance. She wants 100/300/100 liability coverage, $250 deductible collision and full coverage comprehensive. She lives in territory 2 and has been assigned to driver class 2 with a rating factor of 1.25. Based on Table 19-6 and Table 19-7, what would be her total premium, if her three-year-old car were in model class L? (Round your answer to the nearest cent.) a. $355.00 b. $365.00 c. $456.25 d. $465.38
Suppose that there are 2 types of plans available to you. Plan A has a deductible of $500, with 10 percent co-insurance rate for many health care services. Plan B has a deductible fo $1000, with 35 percent co-insurance rate. Plan A costs $200 per month in premiums while Plan B costs $80. Discuss characteristics of people who would choose Plan A versus Plan B. Assuming that both plan types exist in the market, who would likely choose Plan B over Plan A? What plan would you choose?
Please find the attached question.
A Grab driver who does not own the car is very harsh on his driving as he knows that the car is not his. Is this an example of a moral hazard problem? How does moral hazard issue arise?
Many people in the property and liability insurance industry complain about the “automobile problem.” The “automobile problem” consists of a series of interrelated problems. What factors have combined to produce a problem in the automobile insurance area?
How does moral hazard apply to seat belt laws and helmet laws?