An example of screening.

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Chapter 22, Problem 3QCMC

To determine

An example of screening.

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Briefly explain what it means for information to be asymmetric. a. What is Moral Hazard? b. Identify and briefly explain three methods that insurance companies could use to off-set the moral hazard associated with their industry. c. What is Adverse Selection?

Which of the following is an example of moral hazard? Group of answer choices A. Reckless drivers are the ones most likely to buy automobile insurance. b. Retail stores located in high-crime areas tend to buy theft insurance more often than stores located in low-crime areas. C. Drivers who have many accidents prefer to buy cars with air bags. D. Employees recently covered by the company health plan start going to the doctor every time they get a cold. E. Company divisions try to improve profitability at each other's expense.

Because Elaine has a family history of significantmedical problems, she buys health insurance,whereas her friend Jerry, who has a healthier family,goes without. This is an example ofa. moral hazard.b. adverse selection.c. signaling.d. screening