Akerlof Also Discusses the Problem of ____In the Health Insurance

question 4

Multiple Choice

Akerlof also discusses the problem of ____in the health insurance market.Health insurers attempt to estimate, for each individual insurance applicant, the probability that they will file an insurance claim, and price insurance premiums accordingly.However, this is an imperfect process, so the insurer must offer a common premium to a specified group of individuals that reflects the average health of the individuals in the group, even though the individuals in the group differ in terms of their health and thus the probability of a claim.Each individual knows their own health better than the insurer, so those members of the group who are less healthy (and thus more likely to file a claim) will be more likely to purchase insurance policy, and thus the premium set by the insurer to reflect the average health of the entire group will be inadequate to compensate the insurer for the ex post sub-group of individuals that actually purchase a policy.

• A)adverse selection
• B)certification
• C)moral hazard
• D)informational asymmetry

Recognize the impact of material and non-material culture on society.

Explain the relationship between biology and culture in human behavior and social evolution.

Identify the role of symbols, language, and rites of passage in culture.

Distinguish between various perspectives on culture including ethnocentrism, cultural relativism, and multiculturalism.

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Definitions:

Long Run Equilibrium

A state where all inputs can be adjusted by firms and all prices can fully adapt, leading to resource allocation where supply equals demand.

Industry

Refers to a specific sector of the economy that produces and distributes goods or services, such as the technology or pharmaceutical industry.

Short Run

A period in economic analysis during which some factors of production are fixed, allowing only some inputs or operations to be adjusted.

Price Discrimination

A pricing strategy where a seller charges different prices for the same product or service to different customers, based on what the seller believes each customer can afford or is willing to pay.