.Choose the correct statement. A.Adverse selection arises in health insurance because some of the healthiest people choose to be uninsured, at least during their younger years.
1.Choose the correct statement.
A.Adverse selection arises in health insurance because some of the healthiest people choose to be uninsured, at least during their younger years.
B.Moral hazard arises in health insurance because once insured, a person has less incentive to adopt a healthy lifestyle.
C.In the market for health insurance, the buyers have private information and in the market for health care, the sellers have private information.
D.All of the above are correct.
2.Choose the statement that is incorrect.
A.93 million people are covered by Medicare and Medicaid.
B.The government spends $10,387 per person per year on Medicare and Medicaid.
C.About 48 million people limit their health-care costs by using an HMO.
D.The cost of private insurance per person covered is 46 percent of the cost of the government programs.
3.Without knowledge about driver types, there is _______ equilibrium in the market for car insurance.
All the statements are correct
Adverse selection happens when healthy people opt not to go for health insurance and people in risk profile opt to go for health insurance. Buying a health insurance also creates a moral hazard as people think that they are already insured and any damage due to their adventures will be paid by the insurance providers.
Also, buyer of the insurance has private information related to his or her health, any medical history or related issues. But, a health care provider has the private information related to the quality of services, availability of the services and other related details.
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