17. Which of the following is the best example of adverse selection? A) When people with...

17. Which of the following is the best example of adverse selection?
A) When people with pre-existing conditions opt into an insurance plan that doesn’t require

any medical screening such as physicals or questionnaires.
B) When people with pre-existing conditions change providers due to lower insurance

premiums.
C) When people with good health choose the insurance providers with the best rates. D) When insurance companies use deductibles to drive away poor insurance risks.

E)None of the above are examples of adverse selection.

Solutions

Expert Solution

Answer option A)

adverse selection is a form of asymmetric information, when one party involved in a transaction posses more information than the other,

So adverse selection in health insurance happens when the people who are more riskier ( old or unhealthy people) opt for insurance

& Less number of healthier people opt for it.

So if without any medical checkups, compano provide health insurance, then they are more chances that risky people get it

Rahul Sunny answered 2 years ago

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