How can a health insurance mandate help in reducing the problem of adverse selection in the health insurance market?
What will be an ideal response?
The problem of adverse selection occurs in the health insurance market when low-risk individuals stay out of the market due to high premiums. A large number of high-risk individuals in the market further increases the premium causing only high-risk individuals to remain in the market. A health insurance mandate, which requires everybody to purchase a basic insurance plan, implies that low-risk individuals cannot opt out of the market and thus prevents the chain of events triggered by adverse selection.
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If all the assumptions of perfect competition hold, the result is an efficient, or Pareto optimal, allocation of resources. What is necessary to prove this?
What will be an ideal response?
Risk that is related to the uncertainty about interest rate movements is called
A) default risk. B) interest-rate risk. C) the problem of moral hazard. D) security risk.
Suppose Jane has chosen a combination of two goods, A and B, such that MU/P of good A is 10 (MUA/PA = 10), and the MU/P of good B is 10 (MUB/PB = 10). To increase utility with the same amount of money, Jane should:
A. increase the number of B consumed. B. increase the number of A consumed. C. increase the number of A and B consumed. D. do nothing; she cannot increase utility with the same amount of money.
Which of the following is the best example of a vertically integrated firm?
a. General Electric, which produces light bulbs, jet engines, washing machines, and so on b. Kinko's, which has a photocopy store near many colleges and universities c. Americam Apparel, which from a single building in downtowm LA, controls the dyeing, finishing, designing, sewing, cutting, marketing and distribution of the company's product. d. Intel, which makes computer chips for most of the computer manufacturers e. Century 21, which has real estate offices that help people sell a house in one city and buy another house in another city