« previous next »

Author Question: What is adverse selection? Give an example and explain why it is a problem. What will be an ideal ... (Read 72 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?

For about 100 years, scientists thought that peptic ulcers were caused by stress, spicy food, and alcohol. Later, researchers added stomach acid to the list of causes and began treating ulcers with antacids. Now it is known that peptic ulcers are predominantly caused by Helicobacter pylori, a spiral-shaped bacterium that normally exist in the stomach.

Did you know?

In the ancient and medieval periods, dysentery killed about ? of all babies before they reach 12 months of age. The disease was transferred through contaminated drinking water, because there was no way to adequately dispose of sewage, which contaminated the water.

Did you know?

As of mid-2016, 18.2 million people were receiving advanced retroviral therapy (ART) worldwide. This represents between 43–50% of the 34–39.8 million people living with HIV.

Did you know?

Parkinson's disease is both chronic and progressive. This means that it persists over a long period of time and that its symptoms grow worse over time.

Did you know?

Essential fatty acids have been shown to be effective against ulcers, asthma, dental cavities, and skin disorders such as acne.

Natural selection of a population for dark coloration. Natural selection of a population for dark coloration.
Cards Used in a Socially Situated Version of the Problem-Solving Test Cards Used in a Socially Situated Version of the Problem-Solving Test
How to solve an exponential problem using a table of values (Question 2) How to solve an exponential problem using a table of values (Question 2)
Explain how it can be desirable from an intertemporal perspective for a country run a current ... Explain how it can be desirable from an intertemporal perspective for a country run a current ...
Problem Problem
Directional Selection in Peppered Moths Directional Selection in Peppered Moths
Video: Endocytosis - pinocytosis, receptor mediated and Transcytosis

For a complete list of videos, visit our video library