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If there is no uncertainty in society (perfect information: everyone knows if they are going to get sick, when and the level of disease),…?

5) If there is no uncertainty in society (perfect information: everyone knows if they are going to get sick, when and the level of disease),…

A) it is possible for the probability of being sick to equal 20%

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B) people will be willing to pay high premiums for health insurance coverage especially the healthy ones who know they will only have minor illness

C) the expected income when sick = 100

D) the expected income when healthy = $1 million

E) a private health insurance industry will not make any money

13) Given

IS  = $2,000

IH = $7,000

E(I) = $6,500

what is the probability of getting sick (p)?

A) 90%

B) 100%

C) 1%

D) 10%

E) none of the above

IN ADDITION TO THE INFORMATION FROM QUESTION 13

 14) In addition to the question above above assume a health insurance policy that has these values:

r = $500

q = $5,000

we can say that

A) this policy is partial insurance

B) this policy is full insurance

C) this policy achieves state independence

D) b and c

E) this policy does not achieve state independence

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