In the market for health insurance, asymmetric information problems arise because:

a. Health insurance policies always include clauses that only the companies understand. b. Privacy laws prevent the sellers of health insurance from asking buyers pertinent lifestyle questions. c. Buyers of health insurance policies always know more about the state of their health than do the insurance companies. d. The sellers of health insurance require medical exams that give them more information than the buyers normally have

Question

Business

Brynlee Schultz

27 January, 02:48

In the market for health insurance, asymmetric information problems arise because:

a. Health insurance policies always include clauses that only the companies understand. b. Privacy laws prevent the sellers of health insurance from asking buyers pertinent lifestyle questions. c. Buyers of health insurance policies always know more about the state of their health than do the insurance companies. d. The sellers of health insurance require medical exams that give them more information than the buyers normally have

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Answers (1)

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Damarion Cline · Answer 1

Option (C) is correct.

Explanation:

Asymmetric information is also known as information failure. When one person or party in a particular economic transaction have larger information or knowledge about the other party then there is a presence of asymmetric information problem.

It is largely present in the market for health insurance because in this type of market the buyer of the health insurance policies have better information about his health as compared to the seller of the health insurance policies. He may hide some of his health issues at the time of signing the policy, hence, there is a problem of asymmetric information arises.