Private information
A) can create adverse selection but plays no role in creating moral hazard.
B) explains why drivers screen auto insurance companies.
C) means that unless it is overcome, the equilibrium in the market will be a separating equilibrium.
D) plays a role in the markets for health-care insurance and auto insurance.
E) cannot explain why the U.S. expenditures on health care per person exceed those in other major nations.

Question

Quizplus · Accepted Answer

Private information plays a role in the markets for health-care insurance and auto insurance, as insurers need to assess the risk of insuring individuals based on their private information such as health status, accident history, etc. This can lead to adverse selection and the need for screening by individuals.

Private Information