Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Chapter 17, Problem 2RQ
To determine
The lemon problem and its relevance in repair record of used cars.
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Students have asked these similar questions
Whcih of the following could help overcome the problem of adverse selection in the used car market?
Multiple Choice
The buyer could have a mechanic inspect the car before buying it.
The government could enact disclosure laws requiring that potential buyers be told all material facts about the condition of a vehicle for sale.
The seller could include a warranty.
all of the above
Distinguish between adverse selection and moral hazard as they relate to the insurance industry.
It was felt that liability insurance would undermine the tort system, which has as its central theorem the concept that the individual responsible for injuring another should be made to pay for that injury. Do you think the existence of liability insurance causes one to be less careful than he or she might otherwise be?
Chapter 17 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
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- What are some strategies for reducing adverse selection in insurance markets? What sorts of problems do these solutions cause?arrow_forwardA bank that provides financing for the purchase of an auto may require the insured to name the bank on an auto policy to this situation, the bank would have A fiduciary responsibility to the insurer An insurable interest in the auto A surety interest in the auto Rights of subrogationarrow_forwardWhat are some ways a seller of labor (that is, someone looking for a job) might reassure a possible employer who is faced with imperfect information?arrow_forward
- Which of the following reports has the primary purpose lo inform an insurance company about a prospect's previous medical insurance history? A.Medical Information Bureau (MIB) B,Attending physician's stalement C.Inspection report D.Producer's reportarrow_forwardHow can we assess whether a given set of instruments is valid or not?arrow_forwardIf people get higher pay from insurance than their pre premiums. Will this increase or decrease the death rate of average persons? Is this an example of moral hazard or adverse selection? How will an insurance company deal with these problems.arrow_forward
- The used car market can become a “lemon” market, where sellers of poor quality used cars will stay in the market, while sellers of good quality used cars will exit the market. Why is this happening? Is this adverse selection or moral hazard? Give an argumentarrow_forwardHow might adverse selection make it difficult for an insurance market to operate?arrow_forwardThe part of the policy which may request an insured to submit as a proof of loss is called the A.application B.arbitration C.conditions D.insuring agreementarrow_forward
- Adverse selection in insurance business means that those__________ likely to get _________insurance benefits want to purchase insurance the most. Group of answer choices most; large least; small least; large most; small not; anyarrow_forwardIt was taught that liability insurance would undermine the tort system, which has as its central theorem the concept that the individual responsible for injuring another should be made to pay for that injury. Do you think the existence of liability insurance causes one to be less careful than he or she might otherwise be?arrow_forwardwhat does non-stationarity mean ?arrow_forward
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