Answered: 4. Give one reason why it may make more…

4. Give one reason why it may make more sense to use expected net benefits to incorporate risk in a national cost-benefit analysis than it would for an individual to think about risk in this way.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter16: Information, Risk, And Insurance

Section: Chapter Questions

Problem 10RQ: In an insurance system, would you expect each person to receive in benefits pretty much what they...

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in a national cost-benefit analysis than it would for an individual to think about risk in this way.

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How can moral hazard lead to more costly insurance premiums than one was expected?
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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.
In an insurance system, would you expect each person to receive in benefits pretty much what they pay in premiums or is it just that the average benefits paid will equal the average premiums paid?
6. Which is the best example of health care insurance in the sense of socializing risk?a. A dental insurance policy that pays for two check-ups a year but nothing else.b. A comprehensive health care policy that essentially pays for everything including check ups but is very expensivec. A health care policy that is relatively inexpensive but only pays for medical expenses after a $2,000 annual deductible is met. After $2,000 the policy pays 100 percent for everything.
(a)Explain what is meant by "asymmetric information." Identify and explain the twobasic types of problems that arise when there is asymmetric information.
5. Explain how imperfect information problems such as adverse selection and moral hazard might affect the following markets or situations (also identify the problem whether adverse selection or moral hazard or both of them) a. Workers report medical history for health insurance. b. The market for used car. c. The market for automobile collision insurance