Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN: 9781337091985
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 9, Problem 2QR
To determine
Two problems in insurance market.
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Students have asked these similar questions
What benefit do people get from the market forinsurance? What two problems impede the insurancemarket from working perfectly?
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.
When you choose to buy insurance, are you speculating? When you choose not to buy insurance, are you also speculating? Explain.
Chapter 9 Solutions
Brief Principles of Macroeconomics (MindTap Course List)
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- . What levels of risks are properly and most economically passed on to insurance carriers?arrow_forwardFrom utility theory, the demand for insurance depends on the level of risk aversion (i.e. how much you hate uncertainty), the cost of insurance (i.e. if it is within your willingness to pay), as well as wealth. Can you think of anything else that affects demand for insurance?arrow_forwardBreifly discuss the factors that determine demand for an insurance policy and how they different then normal determinant demand of a commodity?arrow_forward
- Why do the government subsidize insurance companies.arrow_forwardDetail a risk that could be transferred to an insurance company, but isn’t utilized as often as the most common ones mentioned. Explain the risk that can be transferred, when it’s used, and why it isn’t.arrow_forwardHow can you use Microsoft Excel and your agility and problem solving skills to understand the level of risk involved in selecting the appropriate insurance to achieve your goals. How will problem solving, productivity, technology, and agility help you achieve your personal and professional goals?arrow_forward
- In the context of asymmetric information, adverse selection and moral hazard, how does marketFailure occur? (Make reference to the insurance or financial market)arrow_forwardSuppose you have $5,000 as a gift from your parents just after you graduate. You have a car, your great grandfather’s rare World War I commemorative badge collection and you quickly found a place to rent for a while. You work in a factory that has a history of workplace injury and you work near the conveyor belts and other giant machines. You are single and live by yourself. Based on this information, what types of insurance would you need to purchase? List each type you would need and explain in 1-2 sentences why.arrow_forward
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