Because People with Hidden Health Problems Are More Likely to Buy

question 103

Multiple Choice

Because people with hidden health problems are more likely to buy health insurance than are other people,

• A) the price of health insurance reflects the costs of a sicker-than-average person.
• B) the price of health insurance is too low, relative to the socially-optimal price.
• C) people in average health may be encouraged to buy too much health insurance, relative to the socially-optimal quantity.
• D) the Condorcet Paradox suggests that people who are sicker than average will ultimately buy more health insurance.

---

Definitions:

Business Activity

Any actions undertaken by a company as part of its operations, including production, sales, marketing, and administration.

Unit Costs

Unit Costs refer to the total expenditure incurred to produce, store, and sell one unit of a product, including all variable and fixed costs.

Variable

An element, feature, or factor that is liable to vary or change; in science and mathematics, a quantity that can assume any of a set of values.

Fixed Costs

Charges that are unaffected by changes in production or sales volumes, like lease payments, employee salaries, and insurance costs.