Which of the following would best describe the insurance in risk, to an insurer resulting from a moral risk? Policyholder’s history of prior losses in high risk crime zones Policyholders lack of proper security measures to protect the insurer property from theft Policyholder’s criminal record involving crimes related to theft Policyholder’s lack of concern about protecting the insured property

Which of the following would best describe the insurance in risk, to an insurer resulting from a moral risk? Policyholder’s history of prior losses in high risk crime zones Policyholders lack of proper security measures to protect the insurer property from theft Policyholder’s criminal record involving crimes related to theft Policyholder’s lack of concern about protecting the insured property

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

Chapter19: The Problem Of Adverse Selection

Section: Chapter Questions

Problem 9MC

See similar textbooks

Similar questions

The difference between the actuarily fair price for insurance and the price a risk-averse individual is willing to pay to fully insure is called a-insurance benefit b-risk aversion c-the risk premium d-risk profit
The ability of insurance to spread risk is limited bya. risk aversion and moral hazard.b. risk aversion and adverse selection.c. moral hazard and adverse selection.d. risk aversion only
Which of the following is considered insurance producer misrepresentation?A. Switching from one insurance coverage to a better one.B. Declaring that dividends will be paid. C. Representing many insurance companies simultaneously D. Requiring an insurance applicant to pay their premium to the insurance company.
Distinguish between adverse selection and moral hazard as they relate to the insurance industry.
Individuals will prefer to fully insure against a potential adverse event if A. individuals are risk-loving and insurance is priced at an actuarially fair rate. B. individuals are risk-averse and insurance is priced at an actuarially fair rate. C. individuals are risk-loving and insurance is priced above the actuarially fair rate. D. individuals are risk-averse and insurance is priced above the actuarially fair rate.
Risk selection" refers to -- a. the incentive of insurance companies to avoid enrolling people who are in worse health and likely will require costly medical care. b. the phenomenon of individuals waiting until they are sick before purchasing health insurance. c. the process by which the Federal government identifies individuals at greatest risk for needing costly health care and provides them special high-risk insurance coverage. d. the incentive of shareholders to avoid investing in insurance companies which insure the most high risk patients.
explain the difference between moral hazard and adverse selection using the example of health insurance. what are the consequences of each of them for the functioning of private insurance markets?
List two possible solutions private insurance firms have at their disposal to correct the market failure due to the asymmetry of information...
Draw a graph with utility on the Y axis and income on the X axis for a risk averse person. Label the following points on the Y axis The expected value of utility while uninsured The expected value of utility with actuarially fair, full insurance The expected value of utility with actuarially far, partial insurance
The key concept that explains why individuals choose to obtain insurance and why they may be less likely to gamble with their wealth is: a. increasing marginal utility in wealth b. constant marginal utility in wealth c. decreasing marginal utility in wealth
In order to remain competitive, insurance companies must successfully address: A. Adverse Selection B. Moral Hazard C. Accurate underwriting (pricing of risk) D. All of the above E. None of the above
Explain how risk aversion makes a market for insurance possible