Insurance companies work toward reducing moral hazard in health insurance by requiring clients to:
a. sign a contract stating they will not engage in risky behavior.
b. return any unspent moneys at the end of the year.
c. be placed in an adverse selection group if they have more than one claim in a 12-month period.
d. reach a deductible threshold before insurance will pay anything.
d. reach a deductible threshold before insurance will pay anything.
A method to reduce moral hazard is to require the injured party to pay a share of the costs. For example, insurance policies often have deductibles, which is an amount that the insurance policyholder must pay out of their own pocket before the insurance coverage starts paying.
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According to this Application, the failure of including cell phones in a timely manner when calculating the CPI caused the telecommunications component of the price index
A) to become negative. B) to be biased upward. C) to be biased downward. D) to actually register no perceptible bias.
Scarcity affects only those who are in need
Indicate whether the statement is true or false
The growth of the Eurodollar market is due to the ________ spreads offered by ________
A) narrower, Eurobanks B) narrower, governments C) narrower, domestic banks D) Both A and B
The government often intervenes when private markets fail to provide an optimal level of certain goods and services. For example, the government imposes an excise tax on gasoline to account for the negative externality that drivers impose on one another. Why might the private market not reach the socially optimal level of traffic without the help of government?