Question 2

Expected value is

		the total value of all possible outcomes.
		the difference between the highest and the lowest outcomes.
		the weighted average of all possible outcomes.
		all of the above.

5 points

Question 3

Reducing income in high-earning years in order to protect yourself against major drops in consumption in low-earning years is

		risk aversion.
		risk smoothing.
		risk pooling.
		risk rating.

5 points

Question 4

If insurers charge everyone the same premium based on the average cost of insuring the entire group

		the poor will drop out because the premiums are too high
		the middle class individuals will drop out because they can self-insure
		the healthiest individuals in the market will drop out
		the sickest individuals in the market will drop out

5 points

Question 5

In the market for insurance

		buyers often have more information than sellers.
		sellers often have better information than buyers.
		sellers are protected from lawsuits brought by buyers.
		demand is perfectly inelastic because, by law, all people must have insurance.

5 points

Question 6

Health insurance markets have a problem with insuring people who are "poor health risks" while many people who are "good health risks" do not buy insurance. This problem is an example of

		moral hazard.
		market signaling.
		adverse selection.
		asymmetric information.

5 points

Question 7

The problem of moral hazard arises because

		individuals receive insurance through their employer, who has different incentives
		some individuals are immoral
		some individuals have religious objections to purchasing insurance
		individuals with insurance have no incentive to avoid insured expenditures

1 points

Question 8

The difference between adverse selection and moral hazard is that

		moral hazard is the motive that is behind one party entering into a transaction with another party. Adverse selection refers to the other party being harmed by the transaction.
		moral hazard refers to the likelihood that a transaction will lead one party to be better off at the expense of the other party to the transaction. Adverse selection refers to the consequences of the transaction after it has occurred.
		moral hazard happens at the time parties enter into a transaction; adverse selection occurs after the transaction takes place.
		adverse selection happens at the time parties enter into a transaction; moral hazard occurs after the transaction takes place.

1 points

Question 9

Some economists have argued that certain characteristics of the delivery of health care justify government intervention. One of these characteristics is

		health care is a public good.
		health care generates positive externalities.
		health care costs in 2010 was lower than 1980s.
		health care is nonrivalrous and nonexcludable.

5 points

Question 10

The Social Security program is like an annuity (private pension plan) in that:

		it is a pay-as-you-go system.
		it is voluntary.
		benefits are a function of earlier contributions.
		you always have a legal right to your benefits.