« previous next »

Author Question: What is adverse selection? Give an example and explain why it is a problem. What will be an ideal ... (Read 40 times)

go.lag

  • Hero Member
  • *****
  • Posts: 667
on: Jun 29, 2018
What is adverse selection? Give an example and explain why it is a problem.
 
  What will be an ideal response?

Question 2

Refer to Table 4-4. Suppose that the quantity of labor demanded increases by 40,000 at each wage level. What are the new free market equilibrium hourly wage and the new equilibrium quantity of labor?
 
  A) W = 8.00; Q = 390,000 B) W = 9.50; Q = 380,000
  C) W = 10.00; Q = 390,000 D) W = 8.50; Q = 380,000


Zebsrer

  • Sr. Member
  • ****
  • Posts: 284
Reply #1 on: Jun 29, 2018
Answer to Question 1

Adverse selection can occur when a buyer or seller enters into an exchange with another party who has more information. In the case of health insurance people who know they are sick are more inclined to seek coverage and to withhold their condition from the insurance company. If insurance companies could identify these individuals they would charge them higher premiums.

Answer to Question 2

C


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

Interferon was scarce and expensive until 1980, when the interferon gene was inserted into bacteria using recombinant DNA technology, allowing for mass cultivation and purification from bacterial cultures.

Did you know?

The human body's pharmacokinetics are quite varied. Our hair holds onto drugs longer than our urine, blood, or saliva. For example, alcohol can be detected in the hair for up to 90 days after it was consumed. The same is true for marijuana, cocaine, ecstasy, heroin, methamphetamine, and nicotine.

Did you know?

The first-known contraceptive was crocodile dung, used in Egypt in 2000 BC. Condoms were also reportedly used, made of animal bladders or intestines.

Did you know?

Though the United States has largely rejected the metric system, it is used for currency, as in 100 pennies = 1 dollar. Previously, the British currency system was used, with measurements such as 12 pence to the shilling, and 20 shillings to the pound.

Did you know?

Approximately 25% of all reported medication errors result from some kind of name confusion.

The birth weight of human infants is tightly constrained by natural selection. The birth weight of human infants is tightly constrained by natural selection.
In 2013, Americans learned that the federal government massively surveys their phone calls and e-mai In 2013, Americans learned that the federal government massively surveys their phone calls and e-mai
Chéri Samba, Problème d'eau. Où trouver l'eau? (The Water Problem. Where to Find ... Chéri Samba, Problème d'eau. Où trouver l'eau? (The Water Problem. Where to Find ...
How to solve a trigonometric problem involving two right triangles (Question 2) How to solve a trigonometric problem involving two right triangles (Question 2)
Trigonometry, Area Problem Trigonometry, Area Problem
Math Thinking Problem Math Thinking Problem
Video: Transmission Across a Synapse

For a complete list of videos, visit our video library