Calculate the net welfare gain/loss for an insurance policy assuming the following amounts. Risk premium => $100
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Question:
Calculate the net welfare gain/loss for an insurance policy assuming the following amounts.
- Risk premium => $100
- Expected benefits => $840
- Moral hazard losses => $80
- Insurance premium => $924
- 2) This question is about "adverse selection."
- Describe adverse selection as it relates to the economics of health insurance.
- We said in class (and in the slides) that when we have two types of people ("healthy" and "sickly") and the insurance company does not know their type, we can get a "separating equilibrium." Describe why the separating equilibrium makes the "healthy" type worse off.
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
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