Which of the Following Is Not Related to Adverse Selection

question 88

Multiple Choice

Which of the following is not related to adverse selection in insurance markets?

• A)An insurance company has no way of distinguishing among applicants
• B)An insurance company must charge a higher price to applicants who are good health risks
• C)The price of insurance is attractive to poor health risks, but not to good ones
• D)The insured group becomes less healthy on average
• E)Because of the relative unhealthiness of the insured group, rates must rise

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Definitions:

Demand for Good

Demand for good refers to the quantity of a product or service that consumers are willing and able to purchase at various prices during a given period.

Equilibrium Quantity

Equilibrium quantity is the quantity of goods or services supplied and demanded at the equilibrium price, where the quantity demanded equals the quantity supplied, leading to market stability.

Demand Decreases

A situation where the desire or need for a product or service declines, often leading to lower prices and adjustments in supply.

Supply Increases

Occurs when the quantity of a good or service that a market can offer rises.