Exam 12: Markets With Private Information

Suppose that there are only two types of used cars, peaches and lemons.Peaches are worth $10,000 and lemons are worth $4,000.Without effective signals such as warranties, the owners of peaches cannot sell their cars for $10,000 because the

Explain the concept of moral hazard.Give an example.

If a salesperson is paid by the volume of sales he or she makes, then the

If you have private information that you are a riskier driver than your record indicates, you are likely to buy an insurance policy that has a ________ deductible and a ________ premium.

Moral hazard is

Most observers suggest that health care in the United States faces two major problems:

In the insurance market, moral hazard and adverse selection are the result of

Private information is a situation in which

In the market for health care services, Health Maintenance Organizations

Which of the following has a positive externality and hence can be under provided?

When an auto insurance company is screening, it is

In a pooling equilibrium, aggressive drivers pay a premium of ________ and safe drivers pay a premium of ________.

Health-care vouchers have been proposed.These vouchers would

Compared to other major nations, the United States spends ________ on health care and achieves ________ efficiency.

-Moral hazard results from _____ information and adverse selection results from _____ information.

In the used car market without warranties, adverse selection results in

If Sally drives less carefully after buying auto insurance, she illustrates

Which of the following is an example of moral hazard?

In the market for auto insurance, in a pooling equilibrium,

In a pooling equilibrium, there ________ a deadweight loss in the market for safe drivers and there ________ a deadweight loss in the market for aggressive drivers.