1. What is adverse selection problem as it relates to the insurance industry? What are the ways insurance companies can do to reduce to adverse selection problem? Explain. What is moral hazard problem in the insurance industry? What can insurance companies do to reduce moral hazard problem? Explain.

2. What is a pay-as-you-go pension plan? Many people fear that the Social Security fund will be unable to meet its obligations by the time they retire. Why? A number of proposals are being considered to help keep Social Security viable for the future. What are these proposal? Explain.