4 marksMarket Failure
CAPE Economics Unit 1 · 2005 · Paper 1 · Question 15(b)
Sick individuals are more prone to buy health insurance than healthy individuals; individuals with fire insurance tend to take fewer precautions against fire.
Classify the two described scenarios under the concepts of asymmetric information, moral hazard, or adverse selection.
The mark scheme is shown once you've answered.
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