QUESTION 1 1. Moral hazard can result from being uninsured having no insurance t

Question

QUESTION 1

1. Moral hazard can result from

being uninsured

having no insurance to having partial insurance

having no insurance to having full insurance

having lousy insurance to having better insurance from the perspective of the patient

b, c, and d

3 points   

QUESTION 2

When moral hazard occurs, the immediate impact is that p (or the probability of the risk)

decreases

increases

is not affected

none of the above

3 points   

QUESTION 3

Nik Walenda who walks the tightropes across buildings, over the grand canyon, and over niagara falls, will not do these things if his group is unable to get insurance before these events. An approved insurance policy is one of their absolute basic requirements before these very risky activities are undertaken. This is an example of insurance causing

ex post moral hazard

ex ante moral hazard

natural hazard

medical arms race

none of the above

3 points   

QUESTION 4

When Indira's child was diagnosed with ear infection, the doctor was going to recommend either Cefaclor or the cheaper Amoxicillin. They are equally as effective.

The doctor gave this information to Indira. In addition the doctor also said that her insurance will cover both and her copay will be the same for either one.

Indira chooses the more expensive Cefaclor. This is a case of

ex post moral hazard

ex ante moral hazard

natural hazard

coinsurance

deductible

3 points   

QUESTION 5

If the original price of medical care (with no insurance) equal $1,000, the quantity demanded = 10. If insurance is provided, out of pocket drops to $300. Also the

quantity of medical care that will be demanded rises to 40. Is there a social loss due to insurance?

yes

no

not enough information

none of the above

3 points   

QUESTION 6

From the previous problem if there is social loss how much is it?

ther

$21,000

$10,500

$3,500

3 points   

QUESTION 7

Which situation provides the potential for the largest social loss due to insurance?

large price distortion and steep demand curve

small price distortion and steep demand curve

small price distortion and steep demand curve

large price distortion and relatively flat demand curve

3 points   

QUESTION 8

Marcus and Jameis have identical insurance policies except that Marcus coinsurance rate is 20% while Jameis coinsurance rate is 18%. Whose policy will create a greater social loss or moral hazard?

Marcus

Jameis

both create identical social losses

none of the above

3 points   

QUESTION 9

Trey and Elijah have identical insurance policies except that Trey's copay is $20 while Elijah's copay is $18. Whose policy will create a greater social loss or moral hazard?

Trey

Elijah

they will cause identical social losses

none of the above

3 points   

QUESTION 10

Donald and Ben have identical insurance policies except that Donald has a deductible of $1,000 while Ben's deductible is $1,800. Whose policy will create a greater social loss or moral hazard?

Donald

Ben

Mario

Jeb

Carly

a.

being uninsured

b.

having no insurance to having partial insurance

c.

having no insurance to having full insurance

d.

having lousy insurance to having better insurance from the perspective of the patient

e.

b, c, and d

Explanation / Answer

1. Moral hazard can result from having lousy insurance to having better insurance from the perspective of the patient. Moral hazard is when the perfect information in available with the insured about the occurrence of an event and the insurer does not have similar or perfect information. This increases the risk of the insurer.

2.When moral hazard occurs the probability of risk will always increase.

3. Ex-ante moral hazard situation is when a person gets insured and then starts to indulge in dangerous and life threatening activities. In these types of cases the premium is often high than normal cases.

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