Travel Insurance (Which Pays a Traveler If the Traveler Needs

question 25

Multiple Choice

Travel insurance (which pays a traveler if the traveler needs to cancel his or her trip) has a clause that states it will not pay if the trip is cancelled because of a pre-existing condition. If sick people are more likely to purchase travel insurance, this clause is meant to

• A) reduce moral hazard.
• B) reduce adverse selection.
• C) increase moral hazard.
• D) increase adverse selection.

---

Definitions:

Functional Levels

Different layers within an organization, each responsible for specific, specialized areas of work or operations.

Quantity Demanded

The total amount of a good that consumers are willing and able to purchase at a given price over a specified period of time.

Quantity Supplied

The total amount of a good or service that producers are willing and able to sell at a given price.

Equilibrium Price

The price level at which the market's offered goods and demanded goods are in balance.