Private Information

question 85

Multiple Choice

Private information

• A) can create adverse selection but plays no role in creating moral hazard.
• B) explains why drivers screen auto insurance companies.
• C) means that unless it is overcome, the equilibrium in the market will be a separating equilibrium.
• D) plays a role in the markets for health-care insurance and auto insurance.
• E) cannot explain why the U.S. expenditures on health care per person exceed those in other major nations.

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Definitions:

Taxes

Financial charges imposed by a government on individuals, corporations, and transactions to fund public spending and services.

Prepaid Workers' Compensation Insurance

An asset account that represents insurance payments made in advance for workers' compensation, which provides coverage for employee injuries on the job.

Workers' Compensation

Insurance providing wage replacement and medical benefits to employees injured in the course of employment.

Gross Payroll

Gross payroll represents the total amount of money a business owes to its employees before any deductions, such as taxes and other withholdings, are made.