Some urologists belong to medical groups that perform their own tests for prosta

Question

Some urologists belong to medical groups that perform their own tests for prostate cancer (and therefore make a profit on every test they order), whereas other medical groups send samples to independent laboratories (in which case they don't profit directly from ordering extra tests). Research has shown that medical groups that perform their own lab work order more tests, but also detect fewer cases of prostate cancer, than groups that use independent labs These results illustrate 0 A. O B ° C. O D. 0 E. neither moral hazard nor adverse selection. adverse selection because doctors who use independent labs have an incentive to test the optimal number o sa pes adverse selection because doctors who perform their own lab work attract patients more likely to have prostate cancer. moral hazard because doctors who use independent labs attract patients who are less likely to have prostate cancer. moral hazard because doctors who perform their own lab work have an incentive to test more than the optimal number of samples.

Explanation / Answer

The results illustrate:

E. moral hazard because doctors who perform their own lab work have an incentive to test more than the optimal number of samples.

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