Question 1

Suppose you foresee two possibilities for your health: You will either get a brain tumor or will have nothing more than a bout with the flu.These two possibilities are called:

Accepted Answer

A)   moral hazards.
B)   self-insurance.
C)   consumption.
D)   states of the world.

Question 2

Which of the following is NOT true about the change in government spending over the past 50 years?

Accepted Answer

A)   The share of defense spending has decreased significantly.
B)   Spending on health and social security spending has increased dramatically.
C)   After adjusting for inflation,government spending has remained constant.
D)   The share of health care spending increased more than the spending in social security and income security.

Question 3

A wide variety of private insurance products exist in the United States,including all of the following EXCEPT:

Accepted Answer

A)   auto insurance.
B)   life insurance.
C)   casualty and property.
D)   Medicare.

Question 4

If government intervenes in the market for health insurance in order to address the adverse selection problem and improve efficiency:

Accepted Answer

A)   there will likely be some redistribution from high-risk individuals to low-risk individuals.
B)   there will likely be some redistribution from low-risk individuals to high-risk individuals.
C)   everyone will be better off as a result.
D)   everyone will be worse off as a result.

Question 5

If the government pays part of the health care costs of citizens determined by the government to be unlucky,which of the following justifications for government intervention is being used?

Accepted Answer

A)   high administrative costs
B)   redistribution
C)   paternalism
D)   externalities

Question 6

Insurance allows individuals to:

Accepted Answer

A)   consume more in every period in the future.
B)   have steadier consumption in every period in the future.
C)   shift consumption from bad possible outcomes to good possible outcomes.
D)   avoid negative outcomes,such as automobile accidents.

Question 7

How do the benefits from disability insurance compare with benefits from unemployment insurance? Compare and contrast each with respect to the factors that influence how much social insurance increases consumption smoothing.

Accepted Answer

The first factor is the predictability o...

Question 8

Which term refers to charging a price for insurance that is a function of realized outcomes?

Accepted Answer

A)   actuarial adjustment
B)   moral hazard rating
C)   experience rating
D)   risk adjustment

Question 9

If you do not qualify for a federal insurance program because your income or wealth is too high,that program is characterized by:

Accepted Answer

A)   adverse selection.
B)   means testing.
C)   moral hazard.
D)   experience rating.

Question 10

The reasons for government involvement in social insurance include all of the following EXCEPT:

Accepted Answer

A)   a potential adverse selection problem stemming from asymmetric information.
B)   a potential savings in decision-making and administrative costs.
C)   the paternalistic belief that some individuals will not engage in necessary planning.
D)   the adverse effect such involvement has on the distribution of income.

Question 11

Suppose you go to buy a life insurance policy and the underwriter asks you to allow the company access to all of your medical records.What is the underwriter concerned about?

Accepted Answer

A)   adverse selection
B)   rent seeking
C)   moral hazard
D)   X-inefficiency

Question 12

Which program provides insurance to cover medical expenditures for individuals over the age of 65?

Accepted Answer

A)   disability insurance
B)   Social Security
C)   workers' compensation
D)   Medicare

Question 13

Individuals value insurance because they would ideally like to:

Accepted Answer

A)   have more consumption when an adverse event like unemployment or illness befalls them.
B)   have less consumption when an adverse event like unemployment or illness befalls them.
C)   have the same consumption regardless of whether an adverse event like unemployment or illness befalls them.
D)   not have an adverse event like unemployment or illness befall them.

Question 14

Asymmetric information between buyers and sellers results in:

Accepted Answer

A)   adverse selection.
B)   rent seeking.
C)   moral hazard.
D)   X-inefficiency.

Question 15

Under realistic conditions,optimal social insurance systems should:

Accepted Answer

A)   not insure individuals against adverse events.
B)   partially,but not completely,insure individuals against adverse events.
C)   completely insure individuals against adverse events.
D)   prevent adverse events.

Question 16

A market equilibrium in which all types of individuals buy full insurance even though it is not fairly priced to all individuals is called a _________ equilibrium and occurs when all consumers are ___________.

Accepted Answer

A)   pooling; not averse to risk
B)   pooling; risk averse
C)   separating; not averse to risk
D)   separating; risk averse

Question 17

Suppose that there are two regions of a state,one where car theft is high and the other where car theft is very low.The state allows insurance companies to charge different premiums (which include insurance against vehicle theft)based in part on where the driver lives.Suppose the government is considering a policy change that would make it illegal to charge higher premiums to people in the areas of higher car theft.
(a)Assume that all drivers in the state are very risk averse when it comes to insurance against theft and that the insurance firms offer one rate to all drivers in that state.What kind of equilibrium will result? Who,if anyone,will pay a risk premium? Who will be better off,and who will be worse off?
(b)What might happen if the drivers in the areas of low car theft were not very risk averse?

Accepted Answer

(a)A pooling equilibrium would result,in...

Question 18

Suppose you and your immediate relatives agree to support one another in the event one of you loses your job.This is an example of:

Accepted Answer

A)   disability insurance.
B)   workers' compensation.
C)   self-insurance.
D)   unemployment insurance.

Question 19

Consumers aim for ____________ because of ______________.

Accepted Answer

A)   self-insurance; diminishing marginal utility
B)   consumption smoothing; diminishing marginal utility
C)   self-insurance; means-tested program benefits
D)   consumption smoothing; means-tested program benefits

Question 20

Maria is a rational consumer with no health insurance.She will use medical care up to the point at which her:

Accepted Answer

A)   total benefit is equal to the cost of medical care.
B)   marginal benefit is zero.
C)   marginal benefit is equal to the marginal cost of medical care.
D)   total benefit is equal to zero.

Exam 12: Social Insurance- the New Function of Government

If government intervenes in the market for health insurance in order to address the adverse selection problem and improve efficiency:

Correct Answer
verified

Maria is a rational consumer with no health insurance.She will use medical care up to the point at which her:

Correct Answer
verified

If you do not qualify for a federal insurance program because your income or wealth is too high,that program is characterized by:

Correct Answer
verified

Which program provides insurance to cover medical expenditures for individuals over the age of 65?

Correct Answer
verified

If the government pays part of the health care costs of citizens determined by the government to be unlucky,which of the following justifications for government intervention is being used?

Correct Answer
verified

Which of the following is NOT true about the change in government spending over the past 50 years?

Correct Answer
verified

Under realistic conditions,optimal social insurance systems should:

Correct Answer
verified

Consumers aim for because of __.

Correct Answer
verified

The reasons for government involvement in social insurance include all of the following EXCEPT:

Correct Answer
verified

How do the benefits from disability insurance compare with benefits from unemployment insurance? Compare and contrast each with respect to the factors that influence how much social insurance increases consumption smoothing.

Correct Answer
verified
The first factor is the predictability o...
View Answer

Individuals value insurance because they would ideally like to:

Correct Answer
verified

A market equilibrium in which all types of individuals buy full insurance even though it is not fairly priced to all individuals is called a _ equilibrium and occurs when all consumers are ___.

Correct Answer
verified

Insurance allows individuals to:

Correct Answer
verified

Correct Answer
verified
(a)A pooling equilibrium would result,in...
View Answer

Suppose you and your immediate relatives agree to support one another in the event one of you loses your job.This is an example of:

Correct Answer
verified

Asymmetric information between buyers and sellers results in:

Correct Answer
verified

Suppose you go to buy a life insurance policy and the underwriter asks you to allow the company access to all of your medical records.What is the underwriter concerned about?

Correct Answer
verified

Which term refers to charging a price for insurance that is a function of realized outcomes?

Correct Answer
verified

A wide variety of private insurance products exist in the United States,including all of the following EXCEPT:

Correct Answer
verified

Suppose you foresee two possibilities for your health: You will either get a brain tumor or will have nothing more than a bout with the flu.These two possibilities are called:

Correct Answer
verified

Exam 12: Social Insurance- the New Function of Government

If government intervenes in the market for health insurance in order to address the adverse selection problem and improve efficiency:

Correct AnswerverifiedShow Answer

Maria is a rational consumer with no health insurance.She will use medical care up to the point at which her:

Correct AnswerverifiedShow Answer

If you do not qualify for a federal insurance program because your income or wealth is too high,that program is characterized by:

Correct AnswerverifiedShow Answer

Which program provides insurance to cover medical expenditures for individuals over the age of 65?

Correct AnswerverifiedShow Answer

If the government pays part of the health care costs of citizens determined by the government to be unlucky,which of the following justifications for government intervention is being used?

Correct AnswerverifiedShow Answer

Which of the following is NOT true about the change in government spending over the past 50 years?

Correct AnswerverifiedShow Answer

Under realistic conditions,optimal social insurance systems should:

Correct AnswerverifiedShow Answer

Consumers aim for ____________ because of ______________.

Correct AnswerverifiedShow Answer

The reasons for government involvement in social insurance include all of the following EXCEPT:

Correct AnswerverifiedShow Answer

How do the benefits from disability insurance compare with benefits from unemployment insurance? Compare and contrast each with respect to the factors that influence how much social insurance increases consumption smoothing.

Correct AnswerverifiedThe first factor is the predictability o...View AnswerShow Answer

Individuals value insurance because they would ideally like to:

Correct AnswerverifiedShow Answer

A market equilibrium in which all types of individuals buy full insurance even though it is not fairly priced to all individuals is called a _________ equilibrium and occurs when all consumers are ___________.

Correct AnswerverifiedShow Answer

Insurance allows individuals to:

Correct AnswerverifiedShow Answer

Correct Answerverified(a)A pooling equilibrium would result,in...View AnswerShow Answer

Suppose you and your immediate relatives agree to support one another in the event one of you loses your job.This is an example of:

Correct AnswerverifiedShow Answer

Asymmetric information between buyers and sellers results in:

Correct AnswerverifiedShow Answer

Suppose you go to buy a life insurance policy and the underwriter asks you to allow the company access to all of your medical records.What is the underwriter concerned about?

Correct AnswerverifiedShow Answer

Which term refers to charging a price for insurance that is a function of realized outcomes?

Correct AnswerverifiedShow Answer

A wide variety of private insurance products exist in the United States,including all of the following EXCEPT:

Correct AnswerverifiedShow Answer

Suppose you foresee two possibilities for your health: You will either get a brain tumor or will have nothing more than a bout with the flu.These two possibilities are called:

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Consumers aim for because of __.

Correct Answer
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Correct Answer
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Correct Answer
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The first factor is the predictability o...
View Answer

Correct Answer
verified

A market equilibrium in which all types of individuals buy full insurance even though it is not fairly priced to all individuals is called a _ equilibrium and occurs when all consumers are ___.

Correct Answer
verified

Correct Answer
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Correct Answer
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(a)A pooling equilibrium would result,in...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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