An article in the Economist magazine observes: Insurance companies often suspect the only people who buy insurance
Question:
An article in the Economist magazine observes:
“Insurance companies often suspect the only people who buy insurance are the ones most likely to collect.”
a. What do economists call the problem being described in the article?
b. If insurance companies are correct in their suspicion, what are the consequences for the market for insurance?
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a The problem being described in the article is known as adverse selection Adverse selection occurs ...View the full answer
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Related Book For 
Money Banking And The Financial System International Edition
ISBN: 978-1292000183
2nd Edition
Authors: R. Glenn Hubbard ,Anthony P Obrien
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