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Economics help watch

    • Thread Starter

    Any assistance in these would be much appreciated:

    1)It is common practice for a buyer who is thinking of buying a used car
    from a stranger to take the car to a mechanic and have it evaluated.
    If more than one potential buyer considers the car, these buyers donít
    share the information, but each of them takes it to a mechanic and
    each pays for a new evaluation. It appears that money could be saved
    if the seller would have the car evaluated and then make this evaluation
    available to all potential buyers. Why do you think this doesn't happen
    more often?

    2) Suppose that researchers discover a new medical test such that persons
    who fail this test are far more likely to have an expensive illness over
    the course of the next year than those who pass the test. An insurance
    company discovers that it would cost only half as much to insure those
    who have passed the test as to insure those who have failed it. This
    company plans to sell health insurance to persons who have taken and
    passed the test at half the price that it charges to others.

    (a) Can you make a case for why a government might choose to make
    it illegal for insurance companies to do this?

    (b) Suppose that insurance companies begin to offer insurance at one
    rate to those who have passed the test and at twice this rate to
    those who have failed it. If you had the choice of either (a) taking
    the test and then buying insurance at the rate that applies to you
    given the result of the test or (b) never taking the test and being
    insured at the rates that applied before the test was invented, which
    option would you choose?
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Updated: November 9, 2015
Do I go to The Streets tomorrow night?

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