Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 17, Problem 15QP
To determine
Identify the statements that come under moral hazard and adverse selection.
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Identify each of the following as an adverse selection or a moral hazard problema. A person with car insurance fails to lock his car doors when he shops at a mall.b. A person with a family history of cancer purchases the most complete health coverage available.c. A person with health insurance takes more risks on the ski slopes of Aspen than he would without health insurance.d. A college professor receives tenure (assurance of permanent employment) from her employer.e. A patient pays his surgeon before she performs the surgery.
1. Indicate which of the following describes a moral hazard problem and which describes adverse selection:
a. A person with a terminal illness buys several life insurance policies via the internet.
b. A person rides carelessly because he has motorcycle insurance.
c. A person who intends to burn down his house takes out a large fire insurance policy.
d. A woman who anticipates having a large family takes a job with a firm that offers exceptional childcare benefits.
Which of the following is an example of moral hazard?
Group of answer choices
A. Reckless drivers are the ones most likely to buy automobile insurance.
b. Retail stores located in high-crime areas tend to buy theft insurance more often than stores located in low-crime areas.
C. Drivers who have many accidents prefer to buy cars with air bags.
D. Employees recently covered by the company health plan start going to the doctor every time they get a cold.
E. Company divisions try to improve profitability at each other's expense.
Chapter 17 Solutions
Microeconomics
Ch. 17.1 - Prob. 1STCh. 17.1 - Prob. 2STCh. 17.2 - Prob. 1STCh. 17.2 - Prob. 2STCh. 17.2 - Prob. 3STCh. 17.2 - Prob. 4STCh. 17.3 - Prob. 1STCh. 17.3 - Prob. 2STCh. 17.3 - Prob. 3STCh. 17.4 - Prob. 1ST
Ch. 17.4 - Prob. 2STCh. 17.4 - Prob. 3STCh. 17.5 - Prob. 1STCh. 17.5 - Prob. 2STCh. 17.5 - Prob. 3STCh. 17 - Prob. 1QPCh. 17 - Prob. 2QPCh. 17 - Prob. 3QPCh. 17 - Prob. 4QPCh. 17 - Prob. 5QPCh. 17 - Prob. 6QPCh. 17 - Prob. 7QPCh. 17 - Prob. 8QPCh. 17 - Prob. 9QPCh. 17 - Prob. 10QPCh. 17 - Prob. 11QPCh. 17 - Prob. 12QPCh. 17 - Economists sometimes shock noneconomists by...Ch. 17 - Prob. 14QPCh. 17 - Prob. 15QPCh. 17 - Prob. 1WNGCh. 17 - Prob. 2WNGCh. 17 - Prob. 3WNG
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- Briefly explain what it means for information to be asymmetric. a. What is Moral Hazard? b. Identify and briefly explain three methods that insurance companies could use to off-set the moral hazard associated with their industry. c. What is Adverse Selection?arrow_forwardQuestion 4 of 6. Which of the following individuals may qualify for a health savings account (HSA)? 0000 Ben and Vivian are covered by Medicare and a supplemental insurance policy. Dominique and Luca have health insurance through the Marketplace. Their deductible is $2,750. Deacon and Annie are covered by a plan through Deacon's work. Their deductible is $4,200. Victor is covered by Medicaid.arrow_forwardIf people get higher pay from insurance than their premiums. Will this increase or decrease the death rate of average persons? Is this an example of moral hazard or adverse seletion? How will an insurance company deal with these problems?arrow_forward
- What are some strategies for reducing adverse selection in insurance markets? What sorts of problems do these solutions cause?arrow_forwardAdverse selection is good ? like the The Affordable Care Act (Obamacare) deals with the problem of adverse selection by using the power of the government to fine individuals who do not sign up for health insurance. do you think it brings benefits or not ?arrow_forward1. An article in the Economist observes: "Insurance companies often suspect the only people who buy insurance are the ones most likely to collect." What do economists call the problem that is described in the article? If insurance companies are correct in their suspicion, what are the consequences for the market for insurance? Use health insurance as an example.arrow_forward
- 4. What kind of liability insurance protects you now as an EMT and as a student paramedic in your clinical sites? 5. At the scene of a shooting, you can see a patient with slow, gasping respirations, but the police will not let you enter the crime scene. How will you feel? 6. Your patient is critical, and you cannot secure the airway. Medical direction tells you to divert because they have no ICU beds. You repeat the urgency of your patient's condition and are still told to divert. You elect to override the physician's order and transport to that hospital. Can you justify disobeying the physician's order! .arrow_forward1. When an auto insurance company is screening, it is A. attempting to keep its private information private. B. marketing its policies to customers. C. ignoring the possibility of moral hazard in order to minimize adverse selection. D. trying to determine if a driver is an aggressive driver or a safe driver. E. making its private information public. 2. In the market for health care services, Health Maintenance Organizations A. help overcome adverse selection by enrolling only healthy clients. B. exist to insure people with preexisting medical conditions. C. overprovide medical care and thereby result in increased costs. D. help overcome moral hazard by monitoring the quality of the service. E. None of the above answers are correct 3. Moral hazard in the market for healthcare services leads Question content area bottom Part 1 A. to providers over treating patients.. B. to healthy people not buying health insurance. C. patients to adopt healthy life styles. D. to all…arrow_forwardWhat is the opportunity cost of having health insurance? What is the opportunity cost of not having health insurancearrow_forward
- how would the adverse selection problem arise in the insurance market? How is it like the lemon used car problem?arrow_forwardPeople drive faster when they have auto insurance. This is an example of: a. Adverse selection. b. Asymmetric information. c. Moral hazard.arrow_forwarda. Sketch a graph of what the insurance market equilibrium looks like if health status is public information and there are no regulations on prices other than the fact that the insurance market is perfectly competitive.arrow_forward
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