What Would Be the Consequence for Patients of Allowing Insurance

question 53

Multiple Choice

What would be the consequence for patients of allowing insurance companies to earn as much as they want?

• A) The principal-agent problem would become less severe.
• B) The adverse selection problem would become more severe.
• C) The moral hazard problem would become more severe.
• D) The adverse selection problem would become less severe.
• E) The moral hazard problem would become less severe.

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Definitions:

Initial Public Offering

The process by which a private company offers shares of stock to the public for the first time.

Capital Contributions

Financial or other assets given to a company by its owners or shareholders to increase its equity or meet its financing needs.

Right to Abandon

A legal or contractual option that allows an entity to give up rights to an asset without any obligations.

Investing

The act of allocating resources, usually money, in the expectation of generating an income or profit.