According to the theory of the demand for health insurance, people buy insurance:

a. Because they are risk averse.

b. To defer consumption.

c. Because of externalities.

d. To insure against poor health.

A private firm can profitably provide health insurance because it can:

a. Collect sufficient premiums to cover all possible losses.

b. Equalize the availability of health care across population groups.

c. Redistribute income from the sick to the healthy.

d. Pool risks over large groups of people.

A fair premium for health insurance is calculated as:

a. The value of certainty to the individual, which reflects their risk aversion.

b. The maximum an individual is prepared to pay for health insurance.

c. The amount of income an uninsured individual would expect to lose, on average

d. The pay-out to the individual if they remain uninsured.