QUESTION 12Under realistic conditions, optimal social insurance systems should:O a. not insure individuals against adverse events.O b. partially, but not completely, insure individuals against adverse events.O c. completely insure individuals against adverse events.O d. prevent adverse events.QUESTION 13When no private market for insurance exists, social insurance programs makeO a. consumption smoothingOb. self-insuranceOc. adverse selectionOd. moral hazardQUESTION 14Moral hazard leads to workers with workers' compensation to set the wage:O a. above the marginal value of leisure.Ob.equal to the workers' compensation payment.O c. above their marginal product.O d. equal to the marginal value of leisure.QUESTION 15In the United States, private insurance exists in each of these product areas EXCEPT:a. auto insurance.b. life insurance.Oc. casualty and property.d. Medicare.possible.QUESTION 16Adrianne is buying a life insurance policy and the underwriter asks her to allow the company to access all her medical records. What is theunderwriter concerned about?a. adverse selectionO b. rent seekingO c. moral hazardO d. X-inefficiency

A government-run programme known as social insurance protects people and families from economic…

QUESTION 12 Under realistic conditions, optimal social insurance systems should: O a. not insure individuals against adverse events. O b. partially, but not completely, insure individuals against adverse events. O c. completely insure individuals against adverse events. O d. prevent adverse events.

QUESTION 12 Under realistic conditions, optimal social insurance systems should: O a. not insure individuals against adverse events. O b. partially, but not completely, insure individuals against adverse events. O c. completely insure individuals against adverse events. O d. prevent adverse events.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.4P

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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
/Suppose that an individual's demand curve for doc-tor visits per year is given by the equation P = 100- 25Q, where Q is the number of doctor visits peryear and P is the price per visit. Suppose also thatthe marginal cost of each doctor visit is $50.a. How many visits per year would be efficient?What is the total cost of the efficient numberof visits?b. Suppose that the individual obtains insur-ance. There is no deductible, and the coin-surance rate is 50 percent. How many visitsto the doctor will occur now? What are theindividual's out-of-pocket costs? How muchdoes the insurance company pay for this individual's doctors' visits?c. What is the deadweight loss (if any) causedby this insurance policy?
An expected utility maximiser owns a car worth £60 000 and has a bank account with £20 000. The money in the bank is safe, but there is a 50% probability that the car will be stolen. The utility of wealth for the agent is u(y) = In(y) and they have no other assets. How much the individual would be willing to pay for a full car insurance, i.e., where the indemnity is equal to the value of the car? O a. At most £40 000. O b. At most £60 000. O c. At most £20000. O d. At most £30 000.
If a doctor knows that an insurance company will pay for most of a patient's bill, the doctor has more of an incentive to require additional medical procedures and tests, even if the patient may not require them. This is an example of O A. adverse selection. O B. the principal-agent problem. O C. asymmetric information. O D. moral hazard.
If a risk‐averse individual owns a home worth $100,000, and that individual iswilling to pay a maximum of $1,000 for an annual fire insurance policy that covers theentire loss in the event of a fire, then we know that:A. There is a one percent chance that the home will be destroyed by fire inthe next yearB. There is a greater than a one percent chance that the home will bedestroyed by fire in the next yearC. There is less than a one percent chance that the home will be destroyedby fire in the next yearD. None of the above is correct
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.
George Akerloff focused the market for used cars and discussed an issue later generally called the "lemons problem." A "lemon" is a low quality used car, with the seller but not the potential buyer aware of this. Since sellers have more information about the quality of the car: O moral hazard causes an inefficiently large number of transactions to occur. O moral hazard causes an inefficiently small number of transactions to occur. adverse selection causes an inefficiently small number of transactions to Occur. adverse selection causes an inefficiently large number of transactions to occur. 1 Previous Next »
27 of 38 Larissa experiences a diminishing marginal utility of income. Because of this we know that Larissa's attitude toward risk is that of O A. risk neutral. O B. risk loving. O C. risk averse. O D. risk caring. Unsure
LIVING IN SPAINJackie moved to Spain to work for a public relations firm. She had health insurance from herprevious employer, but she was surprised to learn that her new employer in Spain did notoffer healthcare coverage. When she asked about this, she was told that more than 90percent of Spaniards use the public healthcare system, which was mostly free. However,her new employer did provide supplementary private health insurance that would allow herto receive quicker care from a private hospital if she desired.Jackie learned that she would be paying 4.7 percent of her salary and her employerwould pay 23.6 percent of her salary to the government for health insurance. She was given a Tarjeta Sanitaria Individual health card to prove that she had health insurance. With this,she could get free care at public hospitals and doctors’ offices. However, before seeing adoctor, she would need to register with a local primary care physician and decide whethershe would use public or private…
John is a 55-year-old male smoker, about 50 pounds overweight, who has high blood sugar and drinks to excess. Because of adverse selection in health insurance, Select one: O a. when John gets health insurance, he will be less likely to take care of himself. O b. if John doesn't have health insurance already, he will not be able to get it. O c. when John gets health insurance, he will be more likely to take care of himself. O d. John is more likely to buy health insurance than the average person since premiums are based on the average risk. O e. John is less likely to buy health insurance than the average personsince premiums are based on the average risk.
14 Imperfect competition and moral hazard. Some economists have argued that moral hazard and monopolistic health care markets are two socially inefficient problems that e 19bnu partially cancel each other out. Relative to the optimal level of health care Q*, how much health care is provided in the presence of moral hazard? Assume perfectly competitive health care markets. a bns b Relative to the optimal level of health care Q*, how much health care is provided in m the presence of monopolistic health care markets? Assume no moral hazard. A bne c Write a one-sentence defense of the argument that moral hazard and imperfectly competitive health care markets could combine to provide a good level of health care provision Q. d Gaynor and Vogt (2000) contend that this argument is not quite right. Draw your own version of the Pauly tradeoff diagram (Figure 11.8) with a locus of feasible contracts under moral hazard and perfect competition in the health care market. Now draw a new focus of…
Why can't safe drivers get lower rates by telling insurance companies that they are less likely to have an accident? Select one: O a. because insurance companies don't want to cut rates for anyone O b. because unsafe drivers would make the same claim O c. because no one can really know if he or she is a safe driver O d. because accidents happen to everyone