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2 Nov 2020

11. Which of the following makes the adverse selection problem in the health insurance market worse?

a. charging high premiums for insurance coverage

b. refusing to offer insurance policies to certain people

c. requesting a medical examination for new applicants

d. all of the above

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Microeconomics
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Understanding Insurance and Imperfect Information
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Raushan Raj
Raushan RajLv8
2 Nov 2020

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Related questions

12. Which of the following is a consequence of the adverse selection problems that health insurance companies face?

a. Health insurance companies charge less for young, healthy people than old, less healthy people.

b. Health insurance companies sometimes refuse to offer health insurance to people with chronic illnesses.

c. Health insurance companies sometimes refuse to offer group insurance to large companies because there are too many insured people to accurately price this insurance.

d. The equilibrium quantity of health insurance is greater than it would be in the absence of adverse selection. 

13. Which of the following is true about adverse selection and moral hazard?

a. Adverse selection is a consequence of asymmetric information; asymmetric information is a consequence of moral hazard.

b. Insurance companies can eliminate adverse selection by charging deductibles and co-insurance, but charging deductibles and co-insurance increases the risk of moral hazard.

c. Adverse selection affects only the market for automobile insurance; moral hazard affects only the markets for health and life insurance.

d. Adverse selection refers to what happens at the time of entering into a transaction; moral hazard refers to what happens after entering into a transaction. 

10. Which of the following groups tends to worsen the problem of adverse selection in health insurance market?

a. good people

b. sick people

c. people living in houses made entirely of rock

d. all of the above 

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