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

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

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter19: The Problem Of Adverse Selection

Section: Chapter Questions

Problem 1MC

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Why can't safe drivers get lower rates by telling insurance companies that they are less likely to have an accident? Select one: a. because no one can really know if he or she is a safe driver Ob. because unsafe drivers would make the same claim O c. because accidents happen to everyone because insurance companies don't want to cut rates for anyone Finish attempf .. ge n this page e here to search.
True or False: Most used cars have a full warranty. O True O False
In an insurance system, would you expect each person to receive in benefits pretty much what they pay in premiums or is it just that the average benefits paid will equal the average premiums paid?
Why is there asymmetric information in the labor market? What signals can an employer look for that might indicate file traits they are seeking in a new employee?
Why is it important to carry auto insurance? O To protect against the risk of a natural disaster O To protect against the risk of serious illness O To protect against the risk of a car accident O To protect against the risk of income loss
An applicant for life insurance must be informed of their rights under the Fair Credit Reporting Al al which of the following times? When tho producer makes the initial appoiniment to see the insured When the producer completes the insured's application When the producer delivers the policy When the insurer receives the initial premium
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
Which of the following are examples of market signals? a. extracurricular activities O b. education c. All of these O d. warranties Market signals are O a. actions taken by buyers and sellers to communicate quality in the presence of perfect information. O b. only strong if obtaining the signal is more costly for individuals with valued traits than for those with non-valued traits. c. used to distinguish between high and low quality and help correct the adverse selection problem. O d. used to differentiate those who will drive equally carefully whether or not they have auto insurance from those who drive less carefully when they have insurance.
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 »
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 Ⓒ
Question: Suppose that the disability insurance (DI)program was changed so that individuals who want to receive DI must first go 10 months without working to demonstrate that they are truly disabled instead of the current five months. a.How would this change affect the moral hazard costs of DI?Explain your answer. A critic of this change does some research and finds out that the acceptance rate(the share of those applying who are accepted into the program) of the DI program increased as a result of the change. He says that this is evidence that the change in the program has increased the moral hazard costs associated with disability insurance. b.Do you agree or disagree with this assessment? Explain your answer.
What is the key difference between a fee-for-service healthcare system and a system based on health maintenance organizations?