Adverse Selection for Sellers: Insurance 1) Health insurance companies face an asymmetri
Adverse Selection for Sellers: Insurance
1) Health insurance companies face an asymmetric information problem because:
A) companies have superior information concerning the risk of illness or injury of those insured.
B) buyers have superior information concerning their risk of illness or injury.
C) the insurance companies and buyers both have equal information concerning the risk of illness or injury of those insured.
D) the probability of becoming ill or injured is unrelated to the insured person's occupation.
2) Adverse selection occurs in the health insurance market because:
A) it is difficult for insurance companies to distinguish between high risk and low risk customers.
B) people cannot predict their future health status.
C) the least healthy people are the least likely to acquire insurance.
D) health care markets are unregulated.
3) One consequence of imperfect information in the health insurance market is that:
A) less healthy individuals are more likely to buy insurance, driving up the cost of insurance for everyone.
B) the most healthy individuals are more likely to buy insurance, leaving the least healthy without access to health care.
C) health insurance increases the demand for health care and so increases the price of health care.
D) unhealthy individuals are denied health insurance.
4) In the used car market, the less-informed party is the ________. In the health care market, the less-informed party is the ________.
A) buyer; seller
B) seller; buyer
C) buyer; government
D) seller; government
5) If workers have better information about their own ability to work than employers do, which of the following situations is present?
B) asymmetric information
D) moral hazard
6) Suppose a health insurance company notes that almost all of its customers are at a high risk of illness or injury. This is an example of:
A) public information.
B) perfect information.
C) a thick market.
D) an adverse selection problem.