Insurance is valuable because a-most individuals are not rational. b-individuals do not know all possible states of the world. c-individuals experience diminishing marginal utility. d-individuals have imperfect information and about the probability of adverse events.
Q: Is the decision to buy pet insurance strictly an economic decision? Explain.
A: An economic decision is a decision when people have to choose between options due to scarcity of…
Q: It was taught that liability insurance would undermine the tort system, which has as its central…
A: Liability insurance- It is a type of insurance that protects against claims arising from personal…
Q: Suppose an individual saves as precaution against adverse events, like unemployment. This is an…
A: The income earned by an individual is either spent or saved. The risk-averse individual likes to…
Q: George Akerloff focused the market for used cars and discussed an issue later generally called the…
A: In the year of 1970, a behavioral economist, George Akerloff published a paper "The Market for…
Q: Misty is single and has chosen Plan Q. Misty has not used her health insurance yet this year.…
A: Below is the given information: The portion of the bill = $5000
Q: A consumer has utility u(I) = VI and income $1,000. When sick, the consumer must go to the doctor,…
A: U = I0.5 Income = $1,000 Visiting the doctor without insurance = $400 Probability of getting sick…
Q: Describe information imperfection and its role in market failure. Do consumers possess perfect…
A: Imperfect information means that one party (either buyer or seller) has more information than the…
Q: If you buy an insurance policy with a high deductible and co-payments, you would end up paying a. A…
A: The deductible is the amount you pay out of pocket for covered health-care services before your…
Q: When a life-long smoker attempts to purchase a life insurance policy Group of answer choices the…
A: Answer: When a life-long smoker attempts to purchase a life insurance policy (and he/she does not…
Q: Business continuation exposure involves the possibility of the owner’s death or disability. From the…
A: The death of a person with a business ownership interest is an example of business-related exposure.…
Q: Demand for Insurance Find the Expected Utility for the Beneficiary (Baseball Pitcher) Determine the…
A: Given, Utility function The probability that pitcher would become injured = 0.1 Earning if he…
Q: When buyers cannot assess the quality of a product before buying, owners of units are more likely to…
A: Company's profit margin per unit sold can be defined as the difference between the price and average…
Q: For each of the following purchases, say whether you would expect the degree of imperfect…
A: A market efficiency depends upon various factors in which one of the major determinant of market…
Q: Life insurance companies require applicants to submit to a physical examination as proof of…
A: Insurance:It is a type of agreement under which insurance company bears the loss against the premium…
Q: In the basic model of insurance, income is the only input into a person’s utility. This is obviously…
A: When a person falls ill, he has to pay lot of expenditure on hospital doctors and medicines. but…
Q: The marginal benefit of a healthcare=100-Q, and the marginal cost of the healthcare=40. If the…
A: Marginal profit (MB) in political economy suggests that the best quantity a shopper is caning to get…
Q: It is often costly to obtain the information necessary to make good decisions. Yet, your own…
A: Rational decision makers need to make an informed decision as they are dependent on the resources…
Q: In economic terms, moral hazard is the negative relationship between the out-of-pocket price of the…
A: Answer: Moral hazard: moral hazard occurs when one party changes his/her behavior after buying…
Q: Why is survival time considered to be a good indicator of health status? A. It measures health…
A: Survival time is considered to be a good indicator of health status because it measures the accounts…
Q: Which of the following is true about imperfect information or asymmetry of information? A. in a…
A: In a market, imperfection refers to the situation when market outcome bis inefficient due to unequal…
Q: The lecture mentions that diminishing marginal utility applies to the consumption of money as well…
A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…
Q: may arise. This is when _____. A. Bismarck; insurers seek out healthy customers. B. Beveridge;…
A: The Bismarck and beveridge are two popular health care systems where the two different methods of…
Q: For each of the following kinds of insurance, give anexample of behavior that can be called moral…
A: Insurance is a tool that individuals and businesses use to protect themselves from the financial…
Q: or a person who previously had no insurance and received an insurance plan paying for 80 percent of…
A: The cost of medical and surgical expenses incurred by the insured is roofed by insurance. The…
Q: A website offers a place for people to buy and sell emeralds, but information about emeralds can be…
A: Both customers and suppliers have complete and timely awareness of all commodity values, their…
Q: Economics The presence of co-insurance has the following effect on price elasticity of demand:…
A: When talking about co-insurance, it can be said that it is the amount of money paid by an insured…
Q: Insurance mandates do little to combat the problem of adverse selection. True False
A: Insurance is a way to manage your risk. When you buy insurance, you purchase protection against…
Q: Insurance coverage has been shown to diminish the importance of time in the decision about how much…
A: Once a person purchases health insurance, he or she is likely to spend a lesser amount of time in…
Q: information refers to a market where one side (either the buyer or the seller, but usually the…
A: One of the effective ways of approaching asymmetric information is by screening. Screening is the…
Q: Which one is an option for health insurance market Universal public insurance Compulsory…
A: Health insurance- It covers the medical and surgical expenses of the individual who is insured.
Q: To receive coverage for bodily injury resulting from an accident with a stolen vehicle, an…
A: A contract between the insurance company and person that helps in providing protection against any…
Q: Adverse selection occurs in insurance markets because: Multiple Choice the seller has more…
A: Adverse selection refers to the situation in which one party fails to make a optimal choice because…
Q: It was felt that liability insurance would undermine the tort system, which has as its central…
A: Liability insurance:- The word "liability insurance" denotes to such an insurance policy which…
Q: Empirical evidence suggests that state laws mandating health insurance coverage for alcoholism…
A: The state laws mandating health insurance coverage for alcoholism treatment lead to moral hazard on…
Q: Which option is the most effective for companies and employees: a standard fee-for-services health…
A: In the insurance market, there are different types of health insurances offered by the insurance…
Q: Why might it be difficult for a buyer and seller to agree on a price when imperfect information…
A: Imperfect information is defined as the market scenario in which buyers and sellers are not at the…
Q: Ralph is choosing whether to purchase health insurance. Here are the features that define his…
A:
Q: 3rd party payments often cause the cost of health care to go down does third party payments to…
A: Third-party payments:- Anyone who's not the patient pays for medical care is referred to as a…
Q: George Akerloff focused the market for used cars and discussed an issue later generally called the…
A: Lemons problem: It refers to the problem which is connected with the defective cars. This problem…
Q: A government policy aimed at protecting people against the risk of adverse events is called
A: There are various policies enacted by the government which are for the benefit of the people.…
Q: Many people in the property and liability insurance industry complain about the “automobile…
A: The primary goal of purchasing insurance is to restore your financial well-being in the case of a…
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- T/F Utility is a subjective concept.Who is most risk-averse? a-an individual with slightly diminishing marginal utility. b-all individuals are equally risk-averse. c-an individual with rapidly diminishing marginal utility. d-an individual who does not experience diminishing marginal utility.Justify the statement. Utility is a subjective concept. T/F
- Is the decision to buy pet insurance strictly an economic decision? Explain.The lecture mentions that diminishing marginal utility applies to the consumption of money as well as the consumption of certain food. Can you give another example where diminishing marginal utility applies? Can you think of any example where diminishing marginal utility does not apply? From utility theory, the demand for insurance depends on the level of risk aversion (i.e. how much you hate uncertainty), the cost of insurance (i.e. if it is within your willingness to pay), as well as wealth. Can you think of anything else that affects demand for insurance? One of the predictions of prospect theory is that we tend to be overly concerned with relatively small risk. Can you think of any example (besides those given in the lecture) that either speaks to this or is an exception?Suppose Jay has been experiencing back pain and that there are two options for back pain: Treatment Regimen Total Cost Pain Reduction Do nothing $0 0 units Cortisone injections $600 30 units Another treatment is discovered. It costs $700 and reduces pain by 25 units. Should he choose the new treatment?
- Suppose Jay has been experiencing back pain and that there are two options for back pain: Treatment Regimen Total Cost Pain Reduction Do nothing $0 0 units Cortisone injections $600 30 units Calculate the ICER between cortisone injections and doing nothing. Jay says he is willing to pay $10 for a per unit of pain reduction. Should he choose cortisone injections? Another treatment is discovered. It costs $700 and reduces pain by 25 units. Should he choose the new treatment?Adverse selection occurs because of A) spreading of risks. B) diminishing marginal utility. C) of imperfect information. D) moral hazardEconomics 2. Suppose that a farmer usually makes profit of $120,000 per year. Let's say that there is a 2% chance that a tornado will hit the farm. This would strongly hurt farmer's profit, leading to losses of $96,000 with 2% probability. a. What is the actuarially fair insurance? b. Assume that the farmer utility is given by u = 7 0.5 where 7t represents profit. What is the farmer's expected utility with no insurance? c. How much would the farmer be willing to pay to have insurance? d. Assume that the farmer expects that the tornado's effect to your farm is lower, only leading to losses of $70,000. i. What is the actuarially fair insurance? ii. What is the farmer's expected utility with no insurance? iii. How much would the farmer be willing to pay to have insurance? iv. What is the risk premium?
- Insurance coverage has been shown to diminish the importance of time in the decision about how much medical care to seek and which providers to use. True OR FalseExplain the purpose of insurance. If a mother purchases health insurance for her and her four (4) children, who is the policyholder, and who is (are) the beneficiaries?before receiving a policy from the insurer, a producer may give an insured a written document as proof of insurance. The document is referred to as a (an) 1. statement of insurance 2. endorsement of insurance 3. binder of insurance 4. manuscript of insurance