The state of Massachusetts requires all citizens to purchase medical insurance or face a monetary penalty when filing their taxes. The penalty is significantly less than the average annual insurance premium. Moreover, the state requires insurance companies to issue policies to anyone who applies, regardless of their health at the time of application. Which of the following examples describes the
inherent adverse selection problem?
a. Tricia purchases an insurance policy through her employer and visits her doctor for annual check-ups.
b. Sue purchases insurance only after learning that she has cancer.
c. Mike pays the penalty rather than purchasing insurance because it is cheaper for him than paying insurance premiums and he is generally in good health.
d. Both b and c are correct.
d
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The order of the letters along the rows of computer keyboards could be changed to allow users to type faster, but this would inconvenience the vast majority of people who learned to type with the current keyboard layout
The costs of switching to a new layout make this change unlikely. This is an example of A) how consumers sometimes do not behave rationally. B) how the elasticity of demand for typewriters has been affected by externalities. C) path dependency. D) how social influences overwhelm the substitution effect of a price change.
A negotiable large-denomination certificate of deposit is an example of a
A) capital market instrument to finance capital acquisitions. B) money market instrument to finance inventories and short-term receivables. C) type of stock held by financial institutions. D) type of stock held by individuals.