A person who practices poisonous snake charming and does not reveal this to her health insurance company before purchasing insurance is an example of
A) moral hazard.
B) adverse selection.
C) signaling.
D) screening.

Question

Quizplus · Accepted Answer

This is an example of adverse selection because the individual is withholding information that is relevant to the insurance company's risk assessment, leading to the possibility of the insurance company facing a higher risk without appropriate premiums. The practice of poisonous snake charming is a risky activity that significantly increases the likelihood of the individual getting injured, which is not disclosed to the insurance company.

A Person Who Practices Poisonous Snake Charming and Does Not