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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

What benefit do people get from the market for insurance? What two problems impede the insurance market from working perfectly?

To determine

Two problems in insurance market.

Explanation

Purchase insurance isthe one way to deal with the risk. The general feature of insurance contract is that a person facing a risk pays a fee to the insurance company, which in return agrees to admit all or part of the risk. That is, the insurance companies share the insured’s loss or risk. The markets for insurance suffer from two types of problems that affect the insurance company working perfectly. These two problems are moral hazard and adverse selection...

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