Exam 24: Price Discrimination

When a person takes the last name of her spouse it signals:

If only sick people buy health insurance:

Most insurance plans in the United States are:

Married women who choose not to take their husband's last name do so because they are signaling divorce will be expensive for them.

Explain the health insurance death spiral.

Critics of the Affordable Care Act argue that it may _____ adverse selection but _____ moral hazard.

An insurance company can prevent the adverse selection death spiral by requiring purchasers to have a medical exam. This will allow the insurance company to:

Moral hazard can be found in many areas because self-interest is everywhere.

The market for used cars functions well because many market institutions have developed to deal with adverse selection.

Ratings and reviews can fail at mitigating moral hazard if:

Ratings systems can be manipulated and therefore do not always eliminate moral hazard.

Which is NOT an example of moral hazard?

Reviews and ratings systems will always accurately reflect product quality.

A signal is an expensive action that is taken to reveal information.

Which is an example of moral hazard?

When a doctor recommends unnecessary surgery to a patient, this is an example of:

People who value their health and therefore purchase health insurance policies:

An information asymmetry occurs when one party to an exchange has more or better information than the other party.

People who complete a college degree typically earn _____ than those who take classes but do not complete the degree.

Moral hazard occurs when an agent tries to exploit information advantage in a dishonest way.