When private companies offer health insurance to their employees the insurance carrier they contract with typically requires that all employees be obligated to participate and pay premiums whether they wish to or not

What problem is the health insurance company trying to avoid? How does this policy mitigate this problem?


The problem that the health insurance companies are trying to avoid is that of adverse selection. Those who believe they are likely to need health insurance are those most inclined to sign up for benefits. Those who are less likely to become sick or perceive themselves at risk would be less enthusiastic. If there were no obligatory participation then health insurance companies would likely be insuring only those workers most likely to make claims. This is not a very profitable way to run a health insurance company.

Economics

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A small open economy is an economy

A) in which both imports and exports are less than 5% of GDP. B) whose firms and consumers are individually, but not collectively price takers. C) whose firms and consumers are collectively, but not individually price takers. D) whose firms and consumers are individually and collectively price takers.

Economics

Fractional reserve banking can be thought of as a bank

A) withholding a portion of its total deposits that are not loaned out. B) holding deposits equal to its net worth. C) paying a fraction of its profit to depositors. D) loaning out all of its reserves.

Economics

The marginal productivity principle has relevance only in a capitalist economy, and not in a socialist system

a. True b. False Indicate whether the statement is true or false

Economics

The effect of the Black Death in 14th-century Europe was to

a. decrease wages. b. increase land rents. c. reduce income inequality between peasants and the landed classes. d. Both a) and b) are correct.

Economics