Learn Before
Uninsurable Risk of Poor Academic Performance
Certain risks are considered uninsurable in the private market, even when they affect individuals. For example, a student, regardless of their diligence, faces the risk of receiving a low grade on a major exam, but it is not a risk against which they can typically purchase insurance.
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CORE Econ
Ch.10 Market successes and failures: The societal effects of private decisions - The Economy 2.0 Microeconomics @ CORE Econ
The Economy 2.0 Microeconomics @ CORE Econ
Introduction to Microeconomics Course
Related
Government Provision of Unemployment Insurance as a Response to Missing Markets
Uninsurable Risk of Poor Academic Performance
The Market for High-Skill Artisans
A company wants to hire freelance graphic designers for a critical, high-stakes project. The company cannot accurately assess a designer's true skill level before hiring them, only after the work is complete. They offer a fixed, generous hourly rate to all applicants. Despite many designers applying, the company finds that the quality of work from those they hire is consistently below their expectations, and they ultimately cancel the freelance program. Which of the following best explains this market failure?
The Market for Academic Insurance
True or False: A private market for insurance against receiving a poor grade in a college course fails to exist primarily because the potential financial losses for students are not significant enough to warrant creating such a product.
The 'Lemons' Problem and Market Collapse
An insurance company wants to sell individual health insurance policies. The company cannot verify an applicant's complete health history or future health risks, but each applicant knows their own health situation well. Match each economic phenomenon to its description in the context of this market.
A market for a specific type of product is failing. Arrange the following events in the logical sequence that explains how an information imbalance, where sellers know the product's true quality but buyers do not, can lead to the complete disappearance of this market.
When buyers in a market cannot distinguish between high-quality and low-quality products, while sellers are aware of the true quality, the price buyers are willing to pay may fall so low that sellers of high-quality goods exit the market. In the most extreme case, this information imbalance can cause the entire market to fail to exist, a situation known as a(n) ________ ________.
A commercial bank is considering offering loans to new tech startups. The bank cannot reliably distinguish between startups with a high probability of success and those with a high probability of failure. The startups, however, have a much clearer understanding of their own potential. If the bank sets a single interest rate for all startup loans that reflects the average risk of the entire applicant pool, what is the most likely long-term outcome for this specific loan market?
Overcoming Information Gaps in Specialized Markets
Government Provision of Unemployment Insurance due to Missing Private Markets
Learn After
A company proposes to sell 'grade insurance' to university students. The policy would pay a student $1,000 if they receive a final grade below a 'B' in a specific course. From an economic perspective, which of the following is the most significant reason this market is unlikely to function successfully?
Analysis of an Uninsurable Risk Market
Viability of Academic Performance Insurance
Profitability of Academic Insurance
The primary reason private insurance companies do not offer policies against receiving a low grade in a course is that the financial loss associated with a poor grade is too small for students to be willing to pay the premiums.
An insurance company is exploring two different ways to market a new 'Grade Protection' policy. However, each marketing approach highlights a different fundamental economic problem that makes such insurance difficult to provide. Match each scenario with the primary economic problem it illustrates.
A company introduces an insurance policy that pays students if they fail a course. Arrange the following events in the logical sequence that demonstrates how a change in student behavior can lead to the failure of this insurance market.
A student who purchases an insurance policy that pays out if they receive a low grade may subsequently reduce their study effort, knowing they are protected from the full financial or academic consequence of a poor result. This change in behavior, which increases the likelihood of the insurance company having to pay a claim, is a classic example of ____.
Evaluating a Proposed Solution for Academic Insurance
Prioritizing Risks in Academic Insurance
Profitability of Academic Insurance