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Principles of Macroeconomics (Mind...

7th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781285165912

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BuyFindarrow_forward

Principles of Macroeconomics (Mind...

7th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781285165912
Chapter 14, Problem 5PA
Textbook Problem
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For each of the following kinds of insurance, give an example of behavior that can be called moral hazard and another example of behavior that can be called adverse selection.

  1. a. health insurance
  2. b. car insurance

Subpart (a):

To determine

Example of moral hazards and adverse selections

Explanation of Solution

Heath insurance: In the case of health insurance, an unhealthy person applying for a health insurance policy is an example of adverse selection because here the possibility...

Subpart (b):

To determine

Examples of moral hazards and adverse selection.

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