Question

The moral hazard problem arising from health insurance is?

1) Expected to be larger the less elastic is demand for health care
2) Expected to be larger the more elastic is demand for health care
3) Intensified by deductibles
4) Exacerbated by high premiums

Answer 1

Moral hazard refers to the case when people engage in riskier behavior with insurance than they would if they did not have insurance. In the context of health insurance, the moral hazard problem arises when individuals change their behavior and demand higher quantities of healthcare services because they know they are covered by insurance. This behavior can lead to increased healthcare costs and inefficiencies in the healthcare system.

Step-by-step explanation:

Moral hazard refers to the case when people engage in riskier behavior with insurance than they would if they did not have insurance. In the context of health insurance, the moral hazard problem arises when individuals change their behavior and demand higher quantities of healthcare services because they know they are covered by insurance. This behavior can lead to increased healthcare costs and inefficiencies in the healthcare system.

Answer: 1) Expected to be larger the less elastic is demand for health care