a) Would moral hazard and adverse selection still
arise in financial markets if information were not Asymmetric?
Explain.
Answer:
b) The more collateral there is backing a loan, the less the lender
has to worry about adverse selection. Is this statement true,
false, or uncertain? Explain your answer. (1.5 marks)
Answer:
insurance is possible and can be profitable because of
a-private information
b-adverse selection
c-consumers are risk aversion
d- moral hazard
e-all of the above
This issue of adverse selection exists in health insurance
market because there is asymmetric information between insurers and
individuals
a) Explain what this "information asymmetry" means - i.e, which
party (the insurer or the individual) has more information about
what
b) Explain why "information asymmetry" in health insurance
market could lead to "death spiral" - i.e as more and more
individuals drop out of the insurance market, the market might
collapse in the end.
Insurance is possible and can be profitable because of
A- private informatiom
B- adverse selection'
C- consequence are risk aversion
D- moral hazards
E- All of the above
Can taxing de merit goods solve moral hazard/adverse selection
in the health care market?
what will this mean for allocative efficieny?
Explain your answer and use a model to explain what will happen
to the market
It is argued that increasingly severe adverse selection and
moral hazard problems in financial markets deepen the financial
crisis in advanced economies. Explain what may cause the increase
in asymmetric information problem and how these problems deepen the
financial crisis.