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3 suppose the keepuhealthy health insurance company

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Unformatted text preview: a credible signal that the product is high quality since only companies selling products that will generate repeat sales are going to find it worthwhile to spend a lot on advertising. 3. Suppose the Keep ­U ­Healthy health insurance company raises its annual health insurance premiums in order to increase revenue. How is the average health of individuals who buy health insurance after the price hike likely to compare to the health of individuals who bought health insurance before the price hike? As health insurance premiums increase, the average health of people who continue to purchase insurance is likely to fall due to adverse selection (only people with poor health will continue to find it worthwhile to purchase the insurance). 4. You are considering buying a used Ford Focus. From reading car magazines, you know that half of all Ford Focuses have mechanical...
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