Imagine Two Congenitally Deaf Infants: One Is Raised in a Loving

question 10

Essay

Imagine two congenitally deaf infants: One is raised in a loving home with social interaction, toys, and lots of activity, while the second is raised in an impoverished orphanage, with basic food/care but little additional social interaction or activity. Both are able to receive a cochlear implant at age 3. What differences, if any, would you expect to observe in the infants' responses to the implants?

Recognize examples and non-examples of adverse selection.

Understand strategies employed by insurance companies to mitigate adverse selection.

Describe characteristics of individuals based on their valuation of lotteries.

Explain how adverse selection affects the functioning of insurance markets.

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Definitions:

Producer Surplus

The difference between how much producers are willing to accept for a good versus how much they actually receive.

Price Support

Price set by government above free-market level and maintained by governmental purchases of excess supply.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service and the actual higher market price they receive.

Market Equilibrium

A condition in a market where the quantity demanded equals the quantity supplied, leading to no pressure for price to change.