Principles Of Microeconomics (book With Myeconlab With Pearson Etext Access Card)
12th Edition
ISBN: 9780134435039
Author: CASE, Karl E.; Fair, Ray C.; Oster, Sharon E.
Publisher: PEARSON
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Question
Chapter 17, Problem 2.1P
To determine
How imperfect information problems such as adverse selection and moral hazard might affect various markets or situations.
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Students have asked these similar questions
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
The Subject: Microeconomic
Chapter Seven
What are the asymmetric information problems in the market for health insurance?
If you understand the principles of insurance, you will understand why it probably makes sense to purchase insurance to guard against large losses, like the destruction of a home you own, but probably does not make sense to purchase insurance to guard against small losses, like the failure of a TV you buy.
Chapter 17 Solutions
Principles Of Microeconomics (book With Myeconlab With Pearson Etext Access Card)
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Similar questions
- Why is imperfect information a problem in market economies? Give a current example of how imperfect information causes a disruption in a market.arrow_forwardIn the context of asymmetric information, adverse selection and moral hazard, how does marketFailure occur? (Make reference to the insurance or financial market)arrow_forwardHow can imperfect information distort markets (i.e. make them less efficient)?arrow_forward
- Ever since the Covid-19 pandemic hit the economy the price of gold has been sky high .Today price per gram of Gold is 5291tk. Imagine yourself as a risk averse investor, explain why you would be more or less willing to buy gold under the following circumstances: a) Prices in the gold market become more volatile. b) An additional tax is imposed on all Government bonds. c)Due to Covid-19 epidemic, the economy experiences a recession. d) You just inherited 1000000tk.arrow_forwardAnswer with a 1: not a problem of information asymmetry, 2: moral hazard, or 3: adverse selection a. Unrest in the Middle East causes oil speculators to buy up oil futures, driving gasoline prices higher. b. Karol is halfway to work before he realizes that he forgot to lock the back door. Because he has renter’s insurance, he decides it is not worth being late to work just to go home to lock the door. c. Joanne applies for a job as a part-time manager at a fast-food restaurant. Her MBA makes her incredibly overqualified for the job, yet the position goes to someone else who doesn’t even have a college degree. d. Frances lives in an apartment above a restaurant, and her apartment always smells like burgers and fries. She has tried unsuccessfully to get the restaurant owner to remedy the problem. e. The potential costs of long-term care (such as a nursing home stay) can be very high and are also very uncertain. Despite this, the private market for long-term care in the United States has…arrow_forward
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