Relating to the Economics in Practice on page 360: 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

Asymmetric information occurs when one party in a transaction has more or better information than the other. In this case, the individual knows their genetic risk, which the insurance company may not, leading to an imbalance in information.

Relating to the Economics in Practice on Page 360: an Individual