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Adverse selection and moral hazard are two important concepts we learned in class.  (1) Give two specific examples on how to combat adverse selection in an insurance market. (6 points) (2) Briefly explain what is “signaling” (from an economist’s view) and how it may reduce adverse selection. (3 points) (3) Give two specific examples, one on moral hazard related to an insurance market, one on moral hazard not related to insurance markets. (6 points)

Adverse selection and moral hazard are two important concepts we learned in class.  (1) Give two specific examples on how to combat adverse selection in an insurance market. (6 points) (2) Briefly explain what is “signaling” (from an economist’s view) and how it may reduce adverse selection. (3 points) (3) Give two specific examples, one on moral hazard related to an insurance market, one on moral hazard not related to insurance markets. (6 points)

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Adverse selection and moral hazard are two important concepts we learned in class. 

(1) Give two specific examples on how to combat adverse selection in an insurance market. (6 points)

(2) Briefly explain what is “signaling” (from an economist’s view) and how it may reduce adverse selection. (3 points)

(3) Give two specific examples, one on moral hazard related to an insurance market, one on moral hazard not related to insurance markets. (6 points)

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