Economics > STUDY GUIDE > ECON 506Micro Unit 4 Study Guide Assignment (All)

ECON 506Micro Unit 4 Study Guide Assignment

Document Content and Description Below

Unit 4 Study Guide Assignment Try to complete this study guide as you work your way through this unit. This study guide is due at the time Unit 4 Test is due. Chapters 16 Information, Risk, and Ins... urance Define the following: 1. Imperfect information: Refers to the situation where buyers and/or sellers do not have all of the necessary information to make an informed decision about the price or quality of a product. 2. Asymmetric information: Occurs when one party to an economic transaction possesses greater material knowledge than the other party. 3. Warranty: A type of guarantee that a manufacturer or similar party makes regarding the condition of its product. 4. Cosigner: Serves as an additional repayment source for the primary borrower and as such, reduces the risk for the lender, helping the borrower obtain a loan. 5. Collateral: An item of value that a lender can seize from a borrower if he or she fails to repay a loan according to the agreed terms. 6. Insurance: A contract, represented by a policy, in which an individual or entity receives financial protection or reimbursement against losses from an insurance company. 7. Premium: An amount paid periodically to the insurer by the insured for covering his risk. 8. Healthcare: The organized provision of medical care to individuals or a community.9. Health Insurance: A type of insurance coverage that typically pays for medical, surgical, prescription drug and sometimes dental expenses incurred by the insured. 10. Risk group: Used to describe people who share traits and behaviors that may put them at risk. 11. Moral Hazard: A situation in which one party gets involved in a risky event knowing that it is protected against the risk and the other party will incur the cost. 12. Deductible: An expense that an individual or a business can subtract from adjusted gross income while completing a tax form. 13. Copayment: A fixed out-of-pocket amount paid by an insured for covered services. 14. Coinsurance: The amount, generally expressed as a fixed percentage, an insured must pay against a claim after the deductible is satisfied. 15. Fee-for-service: A payment model where services are unbundled and paid for separately. 16. Health Maintenance Organization (HMO): An organized public or private entity that provides basic and supplemental health services to its subscribers. 17. Adverse Selection: When sellers have information that buyers do not have, or vice versa, about some aspect of product quality. Answer the following: 18. Explain how car dealers fix the lemon problem in the market for used cars? Lemons offer no value to the buyer, thus driving the Buyer's value below the seller's value for his good used car. Once the seller's value is greater than the buyer’s value, he or she will not be willing to sell.19. Describe how adverse selection happens: Adverse selection occurs when one party in a negotiation has relevant information the other party lacks. The asymmetry of information often leads to making bad decisions. 20. Explain why insurance companies offer plans with different deductibles: Insurance companies offer plans with different deductibles in an effort to lessen their risk. [Show More]

Last updated: 2 years ago

Preview 1 out of 10 pages

Buy Now

Instant download

We Accept: