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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

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question 4 Which of the following methods reduce adverse selection in insurance markets? I. selling insurance policies to groups of employees in a firm II. requiring medical exams for anyone purchasing life insurance III. denying insurance coverage to people with preexisting health conditions IV. mandating by law that all people must buy health insurance I, II, III, and IV OI and III II I and II Question 5 Which 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 the coverage. I and II III II
Transcribed Image Text:Question 4 Which of the following methods reduce adverse selection in insurance markets? I. selling insurance policies to groups of employees in a firm II. requiring medical exams for anyone purchasing life insurance III. denying insurance coverage to people with preexisting health conditions IV. mandating by law that all people must buy health insurance I, II, III, and IV OI and III II I and II Question 5 Which 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 the coverage. I and II III II
Use the image below to answer the following question. Assame that the white curve (labelled "Demand") represents an individuals true demand for this particular health care service. The coinsurance associated with insurance option 1 (in blue) is likely coirsuránce with insurance option 2 (in green) is likely The P 200 100 50 Q Q Demand O 50%: 0% 0%; 50% O 50%; 75% 0%: 75% O 75%; 0% In general, the more demand is the smaller the social loss due to moral hazard. O inelastic O elastic Question 10 Match the term to the definition The amount that the insurance company pays the customer when an insured event occurs. How mach spent out-of-pocket before insurance kicks-in 1. Premium 2. Insurance payout Monthly fee to enroll in insurance 3. Deductible After this, insurance covers 100% of costs 4. out-of-pocket-maximum This occurs when less-risky people are more likely to enroll in health insurance 5. Copay Behavior changes that occur before an insured event happens and make that event more likely 6. ex-ante moral hazard Behavior changes that occur after an insured event happens and make recovering from that event more expensive. 7. Coinsurance 8. ex-post moral hazard The oversupply of low-quality goods, products, or contracts that results when there is asymmetric information. 9. adverse selection The fixed amount that is paid for a service at the time service is 10. advantageous selection rendered. The fraction of the medical bill that the consumer is responsible for.
Transcribed Image Text:Use the image below to answer the following question. Assame that the white curve (labelled "Demand") represents an individuals true demand for this particular health care service. The coinsurance associated with insurance option 1 (in blue) is likely coirsuránce with insurance option 2 (in green) is likely The P 200 100 50 Q Q Demand O 50%: 0% 0%; 50% O 50%; 75% 0%: 75% O 75%; 0% In general, the more demand is the smaller the social loss due to moral hazard. O inelastic O elastic Question 10 Match the term to the definition The amount that the insurance company pays the customer when an insured event occurs. How mach spent out-of-pocket before insurance kicks-in 1. Premium 2. Insurance payout Monthly fee to enroll in insurance 3. Deductible After this, insurance covers 100% of costs 4. out-of-pocket-maximum This occurs when less-risky people are more likely to enroll in health insurance 5. Copay Behavior changes that occur before an insured event happens and make that event more likely 6. ex-ante moral hazard Behavior changes that occur after an insured event happens and make recovering from that event more expensive. 7. Coinsurance 8. ex-post moral hazard The oversupply of low-quality goods, products, or contracts that results when there is asymmetric information. 9. adverse selection The fixed amount that is paid for a service at the time service is 10. advantageous selection rendered. The fraction of the medical bill that the consumer is responsible for.
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