ECON 3510 Study Guide - Final Guide: Adverse Selection, Risk Neutral, Moral Hazard
30 Jun 2019
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Sample final exam questions (selected from post midterm material) This would be consistent with the phenomenon of: adverse selection, cost-shifting, cream-skimming, supplier-induced demand. True/false why questions: if a doctor is a perfect agent for her patients, she will always provide care that is expected to improve a patient"s health. A perfect agent does whatever the patient would prefer if the patient had the same information as the provider. Optimal health care consumption depends both on the effectiveness of health care and patient preferences for health. The condition for the efficient level of consumption (which maximizes net benefit) is that marginal cost equal marginal benefit. A person can have three attitudes toward risk. If they are risk loving, they get benefit from facing risky situations; if they are risk neutral, they are indifferent about facing risk; and if they are risk averse, their welfare suffers when they face a risky situation. The purpose of insurance is to reduce or eliminate risk.
