« previous next »

Author Question: What is adverse selection? Give an example and explain why it is a problem. What will be an ideal ... (Read 95 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?

According to the National Institute of Environmental Health Sciences, lung disease is the third leading killer in the United States, responsible for one in seven deaths. It is the leading cause of death among infants under the age of one year.

Did you know?

People with high total cholesterol have about two times the risk for heart disease as people with ideal levels.

Did you know?

Historic treatments for rheumatoid arthritis have included gold salts, acupuncture, a diet consisting of apples or rhubarb, nutmeg, nettles, bee venom, bracelets made of copper, prayer, rest, tooth extractions, fasting, honey, vitamins, insulin, snow collected on Christmas, magnets, and electric convulsion therapy.

Did you know?

Barbituric acid, the base material of barbiturates, was first synthesized in 1863 by Adolph von Bayer. His company later went on to synthesize aspirin for the first time, and Bayer aspirin is still a popular brand today.

Did you know?

Stroke kills people from all ethnic backgrounds, but the people at highest risk for fatal strokes are: black men, black women, Asian men, white men, and white women.

Stablizing Selection Stablizing Selection
Mutation and selection diagram Mutation and selection diagram
Adverse Effects of the Conventional Antipsychotics Adverse Effects of the Conventional Antipsychotics
An upward-sloping spark line usually indicates a mechanical engine problem or a lean air–fuel ... An upward-sloping spark line usually indicates a mechanical engine problem or a lean air–fuel ...
Hyperbola Math Problem Hyperbola Math Problem
Problem Problem
Video: Ultrasound of a Fetus (Sonogram)

For a complete list of videos, visit our video library