Chapter 18

Question 1

Copayments

Answer 1

Fixed amounts that the insured must pay when receiving a medical service or filling a prescription.

Question 2

Deductibles

Answer 2

Fixed amounts that the insured must pay before most of the benefits can be applied.

Question 3

Coinsurance Payments

Answer 3

Percentage of costs that the insured must pay after exceeding the insurance policy’s deductible.

Question 4

Asymmetric Information

Answer 4

An imbalance of information that occurs when one arty knows more than the other.

Question 5

Adverse selection

Answer 5

when one party has information about some aspect of a product quality that the other party does not have.

Question 6

Principal-agent problem

Answer 6

when a principal entrusts an agent to complete a task and the agent does not do so in a satisfactory way.

Question 7

Moral Hazard

Answer 7

Lack of incentive to guard against risk when one is protected from the consequences.