Explain the following statement: "In health insurance markets, moral hazard implies individuals will consume too much health care, whereas adverse selection implies too little health care will be consumed."

What will be an ideal response?

Moral hazard implies that those who are insured no longer face the marginal cost of medical procedures -- and, as a result, will consume beyond the point where marginal cost is equal to marginal benefit. Adverse selection implies that some individuals will have no insurance -- healthy individuals who choose not to pay the pooling equilibrium price, and lower income individuals who cannot afford to pay the price that will be high given that healthy individuals opt out. The uninsured would then consume too little medical care relative to the efficient amount.