Choose the correct statement.

a. adverse selection arises in health insurance because some of the healthiest people choose to be uninsured, at least during their younger years.

b. moral hazard arises in health insurance because once insured, a person has less incentive to adopt a healthy lifestyle.

c. in the market for health insurance, the buyers have private information and in the market for health care, the sellers have private information.

d. all of the above are correct.

D.All of the above are correct.

Explanation:

Moral hazard is when people have an incentive to engage in risky behaviours when the person is protected against the consequences of such risky behaviour. Moral hazard can arise in health insurance because once insured, a person has less incentive to adopt a healthy lifestyle.

Adverse selection occurs due to asymmetry of information; when one party in a transaction has more information than the other party. An example of adverse selection In insurance - people who have dangerous jobs are more likely to purchase insurance when compared with people with relatively safer jobs. Adverse selection in health insurance is when healthiest people choose to be uninsured, at least during their younger years and become insured when they are getting older and more sickly.

I hope my answer helps you.

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