Please solve the question Question 4Which of the following methods reduce adverse selection in insurance markets?I. selling insurance policies to groups of employees in a firmII. requiring medical exams for anyone purchasing life insuranceIII. denying insurance coverage to people with preexisting health conditionsIV. mandating by law that all people must buy health insuranceI, II, III, and IVOI and IIIIII and IIQuestion 5Which of the following statements is (are) TRUE?I. Moral hazard can either increase or decrease the likelihood of an insurance claim.II. Moral hazard is the result of asymmetric information.III. Insurance coverage sets up moral hazard because people don't respond to the incentives offered by thecoverage.I and IIIIIII Use the image below to answer the following question.Assame that the white curve (labelled "Demand") represents an individuals true demand for this particularhealth care service. The coinsurance associated with insurance option 1 (in blue) is likelycoirsuránce with insurance option 2 (in green) is likelyTheP20010050QQ DemandO 50%: 0%0%; 50%O 50%; 75%0%: 75%O75%; 0%In general, the moredemand is the smaller the social loss due to moral hazard.O inelasticO elasticQuestion 10Match the term to the definitionThe amount that the insurancecompany pays the customer whenan insured event occurs.How mach spent out-of-pocketbefore insurance kicks-in1.Premium2.Insurance payoutMonthly fee to enroll in insurance3.DeductibleAfter this, insurance covers 100%of costs4.out-of-pocket-maximumThis occurs when less-riskypeople are more likely to enroll inhealth insurance5.CopayBehavior changes that occurbefore an insured event happensand make that event more likely6.ex-ante moral hazardBehavior changes that occur afteran insured event happens andmake recovering from that eventmore expensive.7. Coinsurance8.ex-post moral hazardThe oversupply of low-qualitygoods, products, or contracts thatresults when there is asymmetricinformation.9.adverse selectionThe fixed amount that is paid fora service at the time service is10. advantageous selectionrendered.The fraction of the medical billthat the consumer is responsiblefor.

Question 4 Which of the following methods reduce adverse selection in insurance markets? I. selling insurance policies to groups of employees in a firm I1. requiring medical exams for anyone purchasing life insurance III. denying insuranoe coverage to people with preexisting health conditions IV. mandating by law that all people must buy health insurance I, II, III, and IV I and III II OI and II

Question 4 Which of the following methods reduce adverse selection in insurance markets? I. selling insurance policies to groups of employees in a firm I1. requiring medical exams for anyone purchasing life insurance III. denying insuranoe coverage to people with preexisting health conditions IV. mandating by law that all people must buy health insurance I, II, III, and IV I and III II OI and II

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Frontiers Of Microeconomics

Section: Chapter Questions

Problem 4PA

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How can deductibles, copayments, and coinsurance reduce moral hazard?
What is the problem of moral hazard?
2. Suppose the equilibrium price for an average hospital stay in the absence of insurance is S10,000. At that price, 1000 people are hospitalized each year. Now suppose an insurer offers a policy to lower the out of pocket price of a stay to S100, and at that price, 1200 pcople are hospitalized. How much TOTAL premium revenue must be collected to finance this arrangement? HINT: you arc trying to brcak even here to get revenucs to match costs. You are given information that indicates cost. Now you need to consider revenues to balance that out. Keep in mind this is asking about premium revenue. There may be other revenue that you are receiving that you should consider when trying to calculate premium revenue to get to break even. a.
A consumer’s demand for a medical service is as follows: Q = 100 – P, where P is theout-of-pocket price she actually faces. Assume this medical service has a market price of $70.This consumer is considering four different insurance options: no insurance, full insurance, a 50% coinsurance plan, and a copayment plan with a $25 co-pay Calculate the deadweight loss under each insurance scheme and show iton each graph. What do you observe?
12. True or False? Medicaid is a U.S. federal- and state- government-sponsored insurance program that provides insurance to people under age 65 whose incomes fall below a certain threshold (level). O True O False
Insurance buyers have more information about whether they are high-risk or low-risk than the insurance company does. This creates an asymmetric information problem for the insurance company because buyers who are high-risk tend to want to buy more insurance, without letting the insurance company know about their higher risk. How might this problem impact an insurance company? F T O The company will not be impacted. O The insurance buyers, not the company, will be impacted. As high risk buyers submit claims, they will use up the company's funds for that year, and since the company did not adjust for these high risk claims, once that money is used up, remaining claimants won't receive any coverage. The company will be faced with heavy losses. The insurance company may decide not to sell insurance in this market at all or otherwise choose not to sell insurance to those they can identify as high risk. 106 # C 4 $ JUL 21 tv♫♬ % MacBook Pro Search or type URL + W D P N Ⓒ
A9 Describe an example of adverse selection that we may run into in the real world. How does adverse selection impact the policy holders for this specific type of insurance for: High risk participants? Low risk participants? What is one government regulation that has been enacted in the last 20 years that helps either high risk or low risk policy holders in the United States
True or False: Short-term disability insurance usually requires a short waiting period before it pays benefits. O True O False
ease use utility of wealth function in the booK, 8-1 (see below). Certainty Utility B D 200 198 194 D' Total utility 170 of wealth C' Expected Utility A 140 10,000 15,000 19,000 20,000 Wealth FIGURE 8-1 Total Utility of Wealth and the Impact of Insurance Please explain the difference between the certainty utility line and the expected utility line b. Calculate your E(U), given an 80% change of being healthy and 20% of being sick, knowing that your income falls to $10,000 and your utility is 140 if you get sick. Calculate your E(W), given an 80% change of being healthy and 20% of being sick. d. Given that your Certainty Utility Function is U = 200Y-0.00154 and Y is your income, what is your Certainty Utility with insurance (if you are risk averse) What insurance premium will you pay to guarantee a utility of 197? Please provide a calculation.
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What is an actuarially fair insurance policy?