7. John Nyman (2003) advanced an alternative reason why people desire medical insurance coverage. A. Briefly summarize his critiques on conventional insurance theory. B. Using the model described below illustrate the concepts of efficient and inefficient moral hazard, and explain what they are Price MC P (a)

7. John Nyman (2003) advanced an alternative reason why people desire medical insurance coverage. A. Briefly summarize his critiques on conventional insurance theory. B. Using the model described below illustrate the concepts of efficient and inefficient moral hazard, and explain what they are Price MC P (a)

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter14: Transaction Costs, Asymmetric Information, And Behavioral Economics

Section: Chapter Questions

Problem 3.8P

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10.1 explain for me. the question is just discuss
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.
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a. If a pay-as-you-drive insurance program is being implemented to cope with automobile-related externalities associated with driving, what factors should be considered in setting the premium? b. Would you expect a private insurance company to take all these factors into account? Why or why not?