1/ As discussed in class, why is important to pay attention to rising healthcare costs?

Rising healthcare costs only affect the poor.

Healthcare will consume 100% of our nation's GDP if healthcare costs keep rising at an unsustainable path. That means every single dollar we earn will go to health care.

Healthcare costs are only small proportion of the U.S. GDP, so there is no need to pay attention to.

We don't have rising healthcare costs problem in the U.S.

2/ The majority of Americans get their health insurance coverage from:

Medicaid.

non-profit organizations.

their employers.

Medicare.

3/ The health insurance markets is failed for individuals because of:

demand problem.

asymmetric information problem.

substitution problem.

moral hazard problem.

4/ An example of signaling in the real world is:

car warranties.

90-day return policies.

medical license.

all of the above.

5/ Automobile insurance companies offer low-premium contracts with a high deductible and high-premium contracts with low deductibles. How is this an example of screening?

A/ The insurance company has all of the important information about the safety of the driver so this acts as a screening device.

B/ The buyer offers information about his driving habits prior to purchasing insurance so the choice between the low-premium contract with a high deductible and the high-premium contract with a low deductible is just a matter of determining which is least expensive.

C/ If the buyer chooses a low-premium contract with a high deductible, the insurance company has induced her to reveal that she considers herself to be a safe driver. On the other hand, if the buyer chooses the contract with a high premium and low deductible, she considers herself to be a reckless driver.

D/ The insurance company has revealed information about the cost of each policy so the buyer can choose the best policy.