Use sound economic reasoning to assess whether (and why) each of the following people may prefer to purchase insurance
1. Use sound economic reasoning to assess whether (and why) each of the following people may prefer to purchase insurance individually or as part of a group:
a. 65-year-old male, lifelong smoker, with congestive heart failure
b. 25-year-old male, normal weight, no known health problems
c. 35-year-old female, married, no known health problems
2. Do you anticipate adverse selection to be a factor with person a, b, or c? Explain, and be specific in your assumptions.
3. What can insurance companies do to discourage adverse selection?
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