Which of the Following Is an Example of the "Moral

question 23

Multiple Choice

Which of the following is an example of the "moral hazard of health insurance"?

• A)An increase in the number of surgeries prescribed for benign prostate disease beyond the point at which the marginal benefit equals the marginal cost
• B)A decreased willingness of individuals to go to the doctor for minor ailments because of increases in coinsurance rates
• C)An underallocation of resources to medical care because of monopoly power of hospitals
• D)Experience rating of health insurance groups by health insurers

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Definitions:

Net Present Value

The variance between the current worth of incoming cash and the current worth of outgoing cash throughout a specific time frame.

Cost of Capital

The rate of return a company must earn on its investment projects to maintain its market value and attract funds.

Profitability Index

A financial tool used to measure the relative profitability of an investment, calculated as the present value of future cash flows divided by the initial investment cost.

Hurdle Rate

The minimum acceptable rate of return on an investment that a company or investor expects to achieve.