Bundle: Principles of Macroeconomics, Loose-leaf Version, 8th + MindTap Economics, 1 term (6 months) Printed Access Card
8th Edition
ISBN: 9781337378994
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 14, Problem 5PA
Subpart (a):
To determine
Example of moral hazards and adverse selections
Subpart (b):
To determine
Examples of moral hazards and adverse selection.
Subpart (c):
To determine
Example of moral hazard.
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What are some strategies for reducing adverse selection in insurance markets? What sorts of problems do these solutions cause?
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Chapter 14 Solutions
Bundle: Principles of Macroeconomics, Loose-leaf Version, 8th + MindTap Economics, 1 term (6 months) Printed Access Card
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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_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_forwardFor each of the following kinds of insurance, give anexample of behavior that can be called moral /raumtand anotJ,cr example of behavior that can be calledadverse selection.a. health insuranceb. car insurancec. tile insurancearrow_forward
- 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.arrow_forwarda. If a pay-as-you-drive insurance program is being implemented to cope with automobile-related externalities associated with driving, what factors should be considered in setting the premium? b. Would you expect a private insurance company to take all these factors into account? Why or why not?arrow_forward
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