Akerlof also discusses the problem of _ in the health insurance market. Health insurers attempt to estimate, for each individual insurance applicant, the probability that they will file an insurance claim, and price insurance premiums accordingly
However, this is an imperfect process, so the insurer must offer a common premium to a specified group of individuals that reflects the average health of the individuals in the group, even though the individuals in the group differ in terms of their health and thus the probability of a claim. Each individual knows their own health better than the insurer, so those members of the group who are less healthy (and thus more likely to file a claim) will be more likely to purchase insurance policy, and thus the premium set by the insurer to reflect the average health of the entire group will be inadequate to compensate the insurer for the ex post sub-group of individuals that actually purchase a policy.
a. adverse selection
b. certification
c. moral hazard
d. informational asymmetry
A
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Explain the concepts of word-of-mouth influence, opinion leaders, and buzz marketing
What will be an ideal response?
A company calls its bonds at a price of $105,000. The face value is $100,000 and the carrying value of the bonds at the retirement date is $103,745. The issuer's journal entry to record the retirement will include a:
A. Credit to Gain on Bond Retirement. B. Debit to Premium on Bonds. C. Credit to Premium on Bonds. D. Debit to Discount on Bonds. E. Credit to Bonds Payable.
Bargain Basement Inc, is a discount house. It buys brand name products from various
manufacturers and sells them at below the suggested retail price. This practice has angered some of those manufacturers who believe that their products are high quality and should not be sold at bargain basement prices. Several of those manufacturers agree that they will no longer sell their products to Bargain Basement. This action is: A) Legal, because it was reasonable under the rule of reason. B) An illegal group boycott. C) Legal, because it was unilateral. D) An illegal vertical market division. E) An illegal horizontal market division.
The ______ contract consists of topics that one develop as part of an official professional agreement.
a. formal b. informal c. psycholocial d. dialogic