Relating to the Economics in Practice on page 357: An individual with a parent who has Huntington's disease has a 50 percent chance of also having the disease, and can use this information when deciding on the purchase of health insurance. This is an example of ________ favoring potential insurance buyers.
A) moral hazard
B) asymmetric information
C) market signaling
D) adverse selection

Question

Quizplus · Accepted Answer

This is an example of asymmetric information because the individual has more information about their health risk (likelihood of having Huntington's disease) than the insurance company does. This can affect their decision to purchase insurance, potentially at a rate that does not accurately reflect their risk.

Relating to the Economics in Practice on Page 357: an Individual