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Questions and Answers
Which of the following is an example of moral hazard?
Which of the following is an example of moral hazard?
- Sophie deciding not to purchase renter's insurance
- Tom purchasing a group health insurance policy for his employees
- Tom not communicating the cost sharing with his employees (correct)
- Sophie believing her landlord's insurance will cover any losses
Which of the following is an example of adverse selection?
Which of the following is an example of adverse selection?
- Tom not communicating the cost sharing with his employees
- Sophie believing her landlord's insurance will cover any losses (correct)
- Tom purchasing a group health insurance policy for his employees
- Sophie deciding not to purchase renter's insurance
What can be the potential consequence of adverse selection in insurance?
What can be the potential consequence of adverse selection in insurance?
- Lower premiums for high-risk individuals
- Increased competition among insurance companies
- Decreased demand for insurance
- Higher premiums for low-risk individuals (correct)
What is the main reason why Tom's employees become less motivated to stay healthy or shop around for medical care?
What is the main reason why Tom's employees become less motivated to stay healthy or shop around for medical care?
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Why does Sophie decide not to purchase renter's insurance?
Why does Sophie decide not to purchase renter's insurance?
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