Describe three ways that private insurance companies deal with the moral hazard problem
What will be an ideal response?
Private insurance companies can require a deductible, which is a specified amount of money that an insured person must pay before his or her insurance company begins to help cover expenses.
Private insurance companies can require a copayment, which is a fixed amount an insured person pays when obtaining medical care.
A private insurance company can use coinsurance, which is an arrangement under which an insured person pays for some fraction of his or her medical expenses, with the insurance company picking up the other portion.
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The major economic effect of Medicare subsidies is
A) that the number of physicians has decreased since compensation is low. B) to increase the price of medical services and reduce the quantity demanded. C) to increase the price of medical services and increase the quantity demanded. D) to lower the price of medical services and reduce the quantity demanded.
An airline knows that business travelers have more inelastic demand for travel than vacationers. That is, business travelers are often willing to pay more for airline tickets than vacationers. The airline also knows that business travelers do not like to travel over weekends. When customers request airline tickets that do not involve travel over a weekend, the airline determines that a traveler
is likely a business traveler and charges a higher price. This is an example of a. moral hazard. b. signaling. c. screening. d. adverse selection.