Big Health Insurance Company believes it is facing an adverse selection problem. What does this mean?
a. Buyers have more information than the company about their own risk status.
b. The company has only poor-risk customers selecting their policies.
c. The company’s health policies are unappealing to customers, causing them to go elsewhere.
d. Buyers have been changing their minds and switching from one kind of policy to another.
a. Buyers have more information than the company about their own risk status.
Adverse selection refers to the problem in which the buyers of insurance have more information about whether they are high-risk or low-risk than the insurance company does. This creates an asymmetric information problem for the insurance company because buyers who are high-risk tend to want to buy more insurance, without letting the insurance company know about their higher risk.
You might also like to view...
The "real" price of a good is known as
A) the absolute price of the good. B) the dollar price of the good since we use dollars in the United States. C) relative price of the good. D) the price actually paid for a good instead of the sticker price.
Who of the following would be counted as unemployed in Canada?
A) Vik, who has been staying at home watching "The Old and the Boring" soap opera, and not searching since he was laid off at the flour mill. B) James, who is a full-time student looking for a part-time job. C) Emmanuel, who lost his job at the steel plant when an automated assembly line was introduced six months ago, and has been job searching every day. D) Caitlin, who is 14 years old, and looking for a babysitting job. E) Youngmin, who is a part-time hamburger flipper looking for a full-time job.
Describe the type of international monetary system that is currently in use. What advantages do proponents of this type of system cite in support of its use? What disadvantages do its opponents cite?
Connecting all efficient points, we find the ____________
Fill in the blank(s) with the appropriate word(s).