An article in the Economist observes: Insurance companies often suspect the only people who buy insurance are
Question:
An article in the Economist observes: “Insurance companies often suspect the only people who buy insurance are the ones most likely to collect.”
a. What do economists call the problem that is described in the article?
b. If insurance companies are correct in their suspicion, what are the consequences for the market for insurance?
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a Adverse selection b The consequences will be that healt...View the full answer
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Related Book For 
Money, Banking, and the Financial System
ISBN: 978-0134524061
3rd edition
Authors: R. Glenn Hubbard, Anthony Patrick O'Brien
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