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
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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Economics help watch
- Thread Starter
- 09-11-2015 18:11