Which of the following statements about the National Flood Insurance Program is TRUE? a. It covers dwellings, but not commercial risks. b. It may be written in any community in the United States. c. It may only be written in communities participating in the program. d. It has an emergency program for risks located in communities that do not choose in the program. A surplus Lines Broker is required to obtain every applicant's signature on a statement that provides all of the following information EXCEPT a. The policy was denied by insurers licensed by the State of california. b. Guarantee funds will not pay for claims if the insurer becomes insolvent. c. The insurer does not participate in any of the California insurance guarantee funds. d. The policy is being issued by an insurer who is not licensed by the State of California. Which of the following is considered covered equipment under an Equipment Breakdown policy? a. Computer media. b. Excavation equipment. Air conditioning compressor. d Equinment manufactured by the insured for sale

Which of the following statements about the National Flood Insurance Program is TRUE? a. It covers dwellings, but not commercial risks. b. It may be written in any community in the United States. c. It may only be written in communities participating in the program. d. It has an emergency program for risks located in communities that do not choose in the program. A surplus Lines Broker is required to obtain every applicant's signature on a statement that provides all of the following information EXCEPT a. The policy was denied by insurers licensed by the State of california. b. Guarantee funds will not pay for claims if the insurer becomes insolvent. c. The insurer does not participate in any of the California insurance guarantee funds. d. The policy is being issued by an insurer who is not licensed by the State of California. Which of the following is considered covered equipment under an Equipment Breakdown policy? a. Computer media. b. Excavation equipment. Air conditioning compressor. d Equinment manufactured by the insured for sale

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter20: The Problem Of Adverse Selection Moral Hazard

Section: Chapter Questions

Problem 20.4IP

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1. 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…
The principal of a school hires Daniel to teach eighth grade students. One goal the principal has is to prepare the students to do well on standardized tests, as he will be judged based on the results of those tests. Daniel prefers to teach in a more creative way, so the students learn a lot, but perform poorly on their standardized tests. This is an example of what problem? a. Adverse hazard b. Moral hazard c. Adverse selection d. Free-riding
Place an “M” beside the items in the following list that describe a moral hazard problem and an “A” beside those that describe an adverse selection problem a. A person with a terminal illness buys several life insurance policies through the mail. b. A person drives carelessly because she has automobile insurance. c. A person who intends to torch his warehouse takes out a large fire insurance policy. d. A professional athlete who has a guaranteed contract fails to stay in shape during the off season. e. A woman who anticipates having a large family takes a job with a firm that offers exceptional child care benefits.
Why do insurance companies have to charge such a high premium, which limits the number of consumers that can afford their services? a) Sellers of insurance have access to more information than buyers of insurance b) Buyers of insurance have more information than sellers of insurance c) There are too many regulations in insurance markets d) They are affected by positive externalities from other markets Please correct and incorrect answer explanation Note:- Please don't simply copy and paste content from other AI tools or bots, or else I may have to downvote your actions. Do not provide the handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.
In the health insurance market, moral hazard occurs when A.) chronically ill people refuse appropriate medical treatment. B.) chronically ill people buy insurance. C.) patients sue their doctor. D.) chronically ill people cannot buy insurance. E.) providers overtreat patients..
Suppose instead the man’s neighbor, who is not a public servant, sees the man dangling from his 4th floor patio. The neighbor springs into action, busting down the man’s door and pulling him to safety from the patio. In gratitude, the man promises to Venmo his neighbor $50,000 for saving him. Is that promise enforceable? a) No, because a promise made on account of something that the promisee has already done is not enforceable b) Yes, because legal sufficiency has nothing to do with adequacy of consideration c) Yes, because there was an offer that was accepted d) No, because the man was obviously incompetent, because only a mindless idiot would have gotten stuck like that
1.) Suppose an insurance company wants to charge a very healthy individual a premium of $1,200 a year for health coverage. It also wants to charge a less healthy individual a premium of $3,600 a year for health coverage. It is seeking to ascertain from any given customer information regarding his/her health by asking for several pieces of health-related information, such as doctor assessments of the person’s health, history of health-related problems, etc. The opportunity cost of a very healthy person securing a health report is $250 and the opportunity cost of a less healthy person securing a health report is $650. Of the choices below, how many reports should the company request to best ensure its paying the right premium to the right person? a. 6. b. 2. c. 0. d. 14. 2). Reconsider again the previous health insurance question. Suppose that due to some innovations in technology as well as increased efforts to shorten/streamline patient reports as doctors look for ways to…
Consider a used car market with asymmetric information. The owners of used cars know what their vehicles are worth but have no way of credibly demonstrating those values to potential buyers. Thus, potential buyers must always worry that the used car they are being offered may be a low quality “lemon.” a. Suppose that there are equal numbers of good and bad used cars in the market and that good used cars are worth $13,000 while bad used cars are worth $5,000. What is the average value of a used car? b. By how much does the average value exceed the value of a bad used car? By how much does the value of a good used car exceed the average value? c. Would a potential seller of a good used car be willing to accept the average value as payment for her vehicle? d. If a buyer negotiates with a seller to purchase the seller’s used car for a price equal to the average value, is the car more likely to be good or bad? e. Will the used-car market come to feature mostly—if not exclusively—lemons? How…
This is a Microeconomics problem. (a) What is adverse selection in the context of a market with asymmetric information? (b) Explain how adverse selection can cause undesirable outcomes in a health insurance industry over time.
Suppose the market for auto insurance is made of up two types of buyers: high-risk and low-risk. Buyers’ willingness to pay (WTP) for auto insurance plans, and sellers’ willingness to accept (WTA) when selling plans to each type of buyer, are outlined in a photo (a) In a world with perfect information, would the market for insurance plans clear? If not, why? If yes, what are some prices that would a llow both markets to clear? The prices in each market are allowed to differ Assume now that there is asymmetric information and that insurance companies do not know how risky an individual buyer is. In the face of this uncertainty, they determine that the probability that a “walk-in” is high-risk is 0.75. What is the minimum price sellers are willing to accept when selling an insurance plan? At this price, will low- and high-risk buyers both be willing to purchase this insurance plan? Explain. Be sure the mention adverse selection in your answer.
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.
4. Consumers know that some fraction of all new cars produced and sold in the market are defective. The defective ones cannot be identified except by those who own them. Assume that cars do not depreciate in value with use. Suppose consumers are risk-neutral and value non-defective cars at $10,000 each and defective cars at $6,000 each. a. If consumers are willing to pay $8,000 for a new car, what percentage of new cars are defective? b. If you saw a used car for sale with a price tag of $6,500, would you purchase this car? c. How many used cars for sale in this market will be good cars?