Adverse selection in insurance implies that potential customers all people face

Question

Adverse selection in insurance implies that potential customers all people face the same risk insurers cannot tell the risk levels that different individuals face people arc not risk averse Economists disagree with constant government bailouts of large. struggling coma because it can give a rise to Moral hazard Adverse selection Lazy managers None of the above The following is NOT an example of a potential monitoring solution to moral rejecting a job candidate that fails to show up at the allotted interview time listening in on call centre conversations blocking social network sites on company computers GPS tracking devices in repair trucks

Explanation / Answer

Answer 1:

The problem of adverse selection in the insurance market arises because the the insurers cannot differentiate between high risk and low risk individuals.Thus, option C.

Answer 2:

Option A. Constant bailouts do not assure that the company will take right steps in the future to ensure that the need for bailout is not required again. Thus, it leads to hidden action problem or problem of Moral Hazard.

Answer 3:

Option A.

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