Related to the Economics in Practice on page 357: Insurance companies are interested in being legally allowed to obtain the results of genetic testing before deciding on issuing insurance policies to potential buyers, which would lessen the problem of ________ in the health insurance market.
A) moral hazard
B) market signaling
C) adverse selection
D) risk-loving

Question

Quizplus · Accepted Answer

Adverse selection occurs when one party in a transaction has more information than the other, typically leading to an imbalance in the transaction. In the context of health insurance, if insurance companies could access genetic testing results, they could better assess the risk of insuring individuals, thereby reducing the problem of adverse selection where individuals with higher health risks are more likely to seek insurance.

Related to the Economics in Practice on Page 357: Insurance