Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 22, Problem 2QR
To determine
The problem of adverse selection.
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Briefly explain what is “signaling” (from an economist’s view) and how it may reduce adverse selection.
Define the difference between moral hazard and adverse selection using an example. .
What is moral hazard?
Chapter 22 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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- Adverse selection is good ? like the The Affordable Care Act (Obamacare) deals with the problem of adverse selection by using the power of the government to fine individuals who do not sign up for health insurance. do you think it brings benefits or not ?arrow_forwardThe difference between moral hazard and adverse selection is a. moral hazard has to do with unobservable characteristics of individuals b. moral hazard has to do with unobservable actions of individuals c. adverse selection is when individuals change their behaviors because of a contract d. adverse selection is when you choose the wrong answer on a testarrow_forward23) Which of the following is an example of adverse selection? A) Individuals who have a history of not being careful with their possessions are more likely to insure them against accidental damage. B) Individuals with makes of cars that are widely known to be the target of car theft are more likely to insure their car. C) Individuals with possessions that are costly to replace are more likely to insure them against accidental damage. D) all of the abovearrow_forward
- How does moral hazard apply to seat belt laws and helmet laws?arrow_forwardIn the mid-1990s, the state of New Jersey revised its rules for the individual insurance market and began requiring that insurers charge the same premiums for the same coverage to all applicants. Assuming that insurers had previously used medical underwriting, which of the following is a predictable consequence of adverse selection? 1) Insurance becomes less attractive to the healthiest individuals, so fewer of them buy it 2) Insurers’ average costs of providing coverage increase because of a changing risk pool 3) The average age of those buying in the individual market goes up 4) All of the abovearrow_forwardIn the health insurance market, moral hazard occurs when A.) chronically ill people refuse appropriate medical treatment. B.) chronically ill people buy insurance. C.) patients sue their doctor. D.) chronically ill people cannot buy insurance. E.) providers overtreat patients..arrow_forward
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