Risk selection" refers to -- a. the incentive of insurance companies to avoid enrolling people who are in worse health and likely will require costly medical care. b. the phenomenon of individuals waiting until they are sick before purchasing health insurance. c. the process by which the Federal government identifies individuals at greatest risk for needing costly health care and provides them special high-risk insurance coverage. d. the incentive of shareholders to avoid investing in insurance companies which insure the most high risk patients

Risk selection" refers to -- a. the incentive of insurance companies to avoid enrolling people who are in worse health and likely will require costly medical care. b. the phenomenon of individuals waiting until they are sick before purchasing health insurance. c. the process by which the Federal government identifies individuals at greatest risk for needing costly health care and provides them special high-risk insurance coverage. d. the incentive of shareholders to avoid investing in insurance companies which insure the most high risk patients

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

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter27: The Basic Tools Of Finance

Section: Chapter Questions

Problem 5PA

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The government can help solve the problem of adverse selection in each of these ways EXCEPT: a. reducing the need for insurance. b. requiring that everyone buy insurance. c. providing incentives for buyers to reveal private information. d. providing insurance.
An efficient market for risk, such as an insurance market, is MOST likely to exist: a. when the sellers of insurance are risk- averse but the purchasers are not. b. when there is a level playing field so that all participants have approximately the same wealth and the same degree of risk aversion. c. in the presence of private, or asymmetric, information. d. when there are significant differences between individuals' wealth levels and attitudes toward risk.
1. We should expect to see more people in a group to purchase insurance as the probability of illness ___________ and the costs of an illness ____________.
Government provided social insurance is most beneficial in the cases where the probability of adverse events is _____ to calculate and the costs of the adverse events are _____. a.hard/low b.easy/high c.easy/low d.hard/high
The key concept that explains why individuals choose to obtain insurance and why they may be less likely to gamble with their wealth is: a. increasing marginal utility in wealth b. constant marginal utility in wealth c. decreasing marginal utility in wealth
1)Describe an example of moral hazard that we may run into in the real world. Think of something that is legal and not inherently lethal, yet still demonstrates elevated risk for the participant who would likely act safer if insurance or protection was not available. Explain why someone might take this risky action. What are the benefits to the risky behavior? In your response to two of your peers, explain what an insurance company may do to reduce the likelihood that an individual would take this risk. Keep in mind, that we cannot always just deny coverage if an individual is participating in the risky behavior.
Because of the moral hazard problem, a-the government has increased incentive to regulate insurance markets. b-low-risk individuals do not choose insurance. c-the costs of providing insurance decreases. d-full insurance may no longer be efficient.
How might adverse selection make it difficult for an insurance market to operate?
1. When an auto insurance company is screening, it is A. attempting to keep its private information private. B. marketing its policies to customers. C. ignoring the possibility of moral hazard in order to minimize adverse selection. D. trying to determine if a driver is an aggressive driver or a safe driver. E. making its private information public. 2. In the market for health care services, Health Maintenance Organizations A. help overcome adverse selection by enrolling only healthy clients. B. exist to insure people with preexisting medical conditions. C. overprovide medical care and thereby result in increased costs. D. help overcome moral hazard by monitoring the quality of the service. E. None of the above answers are correct 3. Moral hazard in the market for healthcare services leads Question content area bottom Part 1 A. to providers over treating patients.. B. to healthy people not buying health insurance. C. patients to adopt healthy life styles. D. to all…
Which is the best example of health care insurance in the sense of socializing risk? a. A dental insurance policy that pays for two check-ups a year but nothing else.b. A comprehensive health care policy that essentially pays for everything including check ups but is very expensivec. A health care policy that is relatively inexpensive but only pays for medical expenses after a $2,000 annual deductible is met. After $2,000 the policy pays 100 percent for everything.
An insurance company suffers from adverse selection if Select one: a. Safe customers are less likely to insure than risky customers b. Customers know their willingness to pay for insurance but the company does not c. Its customers are risk averse d. Customers take on much greater risk because than insure
For each of the following kinds of insurance, give anexample of behavior that reflects moral hazard andanother example of behavior that reflects adverseselection.a. health insuranceb. car insurancec. life insurance

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	a.	the incentive of insurance companies to avoid enrolling people who are in worse health and likely will require costly medical care.
	b.	the phenomenon of individuals waiting until they are sick before purchasing health insurance.
	c.	the process by which the Federal government identifies individuals at greatest risk for needing costly health care and provides them special high-risk insurance coverage.
	d.	the incentive of shareholders to avoid investing in insurance companies which insure the most high risk patients.