One result of asymmetric information in health insurance markets is: 1. an optimal number of insurance...

One result of asymmetric information in health insurance markets is:

	1.	an optimal number of insurance policies sold
	2.	adverse selection
	3.	externalities in consumption
	4.	a low marginal benefit of additional information for the buyer of insurance
	5.	the principal-agent problem

Expert Solution

Option 2 is the answer.
Adverse selection.
One result of asymmetric information in health insurance market is adverse selection.
When the market participation is affected by asymmetric information, then we can say that there occurs adverse selection. Adverse selection is a state in which health insurance providers and insured customers are not having enough knowledge about each other. In this situation, due to the presence of asymmetric information, the insurance provide won't be able to know that which plan is to be provided to the customer. This can happen to the customer too; problem regarding selection of the plan. This in turn causes many loss to customers as well as insurance providers.

Rahul Sunny answered 3 years ago

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