SOLVED

31) How do current tax laws in the United States favor employer-based health care insurance? A) Individuals who receive health insurance benefits are allowed to deduct the value of these benefits from their taxable income. B) Employers who provide health insurance benefits are reimbursed by the government and are not taxed on these reimbursements. C) Individuals who receive health insurance benefits do not pay taxes on the value of these benefits. D) Health insurance companies that provide insurance to employers are subject to a lower tax rate than those insurance companies that provide insurance to private individuals. 32) One effect of adverse selection in a market is that the equilibrium quantity of the product may 33) The situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction is known as asymmetric information. 34) If a state requires all citizens to buy health insurance, the problem of adverse selection is eliminated. 35) A doctor pursuing his own interests rather than the interests of his patients is an example of the principal-agent problem. 36) Moral hazard refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off. 37) Health insurance companies impose deductibles on policies and co-payments on claims to reduce the problem of adverse selection. 38) What is adverse selection? 39) Suppose you see a 2006 Scion xB Sport Wagon advertised in the local newspaper for $8,500. If you knew the car was reliable, you would be willing to pay $10,000 for it. If you knew the car was unreliable, you would only be willing to pay $5,500 for it. Under what circumstances should you buy the car? 40) What is moral hazard? 41) Suggest three ways by which health insurance companies can reduce adverse selection? 1.finding out as much information about a person applying for insurance, for example requiring a medical examination 2.refusing to insure some applicants, for example based on prior health conditions 3.by insuring only large groups of people 42) What is an externality? Explain how someone receiving a meningitis vaccination is an example of an externality in the market for health care.