(Solved):For each of the following kinds of insurance, give an example of behavior that can be called moral hazard and another example of behavior that can be called adverse selection. a) health insurance,… View Answer…

 

Question

For each of the following kinds of insurance, give an example of behavior that can be called moral hazard and another example of behavior that can be called adverse selection.

a) Health insurance,

b) Car insurance.

 

EXPERT ANSWER

_a

Adverse selection: If a person who smokes cigarettes buys a health insurance is an example of adverse selection. This is because the insurance company does not know that the person smokes and hence provides him an

Scroll to top