A consequence of adverse selection for the insurance market is that:
A. risk-seeking individuals typically pay higher premiums than risk-averse individuals.
B. everyone ends up paying higher premiums.
C. risk-averse individuals typically pay higher premiums than risk-seekers.
D. everyone ends up paying lower premiums.
B. everyone ends up paying higher premiums.
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Assume that 50 percent of the population consisting of 2,000 low-risk people and 1,000 high-risk people choose a comprehensive health insurance plan having a break even premium of $800 . The remaining 50 percent, also consisting of 2,000 low-risk people and 1,000 high-risk people, choose a Health Maintenance Organization plan having a break even premium of $400 . If high-risk people submit claims
worth $2,000 under the comprehensive plan and $1,000 under the HMO plan, which of the following situations will occur? a. High-risk people will shift to the comprehensive plan resulting in an increase in its premium rate. b. High-risk people will shift to the HMO plan resulting into a fall in its premium rate. c. Low-risk people will shift to the comprehensive plan resulting in a substantial decrease in its premium rate. d. Low-risk people in both groups will stick to their respective plans and minimize their losses.
In general, the price elasticity of demand for milk will be less than that for Apple's iPod
Indicate whether the statement is true or false
A vocal minority of economists, believers in the theory of rational expectations, insist that
A. the Phillips curve is downward sloping even in the short run. B. the Phillips curve is vertical even in the short run. C. a trade-off exists between inflation and unemployment even in the long run. D. expansionary fiscal and monetary policy can reduce unemployment without creating inflation.
Regretting the last unit of consumption of beer implies that
A. the total utility from drinking beer is negative. B. the demand curve for beer is horizontal. C. the marginal utility of the last unit of beer consumed is negative. D. beer is an inferior good.