Suppose you are covered under health insurance or belong to a Health Maintenance Organization (HMO), and you are insured against all or most of the costs of visits to the doctor. As a result you are likely to make greater use of medical services of all kinds. This tendency of people with insurance to change their behavior in a way that leads to more claims against the insurance company is called
A)adverse selection.
B)moral hazard.
C)screening
D)signaling.

Question

Quizplus · Accepted Answer

This phenomenon is called moral hazard, as the individual with insurance may take more risks, knowing that any resulting costs will be covered. Adverse selection refers to the tendency of higher-risk individuals to seek out insurance more often than lower-risk individuals, while screening and signaling refer to the screening process used by insurance companies to evaluate risks and the methods individuals may use to convey their risk level, respectively.

Suppose You Are Covered Under Health Insurance or Belong to a Health