Problem 1: One feature of the financial crisis was that there were more severe credit market frictions - particularly asymmetric information and limited commitment. Briefly explain the terms 'asymmetric information' and 'limited commitment'. You can use examples to further support your answer.
Problem 2: Long-term insurance in the United States is a product sold to help provide for the cost of long term health care beyond a predetermined period, which is usually not covered by regular health insurance.
Problem 3: Long-term insurance sellers are beginning to charge women more for policies. Why would they do, this? Name and explain this phenomenon.
Problem 4: When long-term care insurance policies were first offered, with few restrictions, what type of individuals might have been more likely to buy these policies? Name and explain this phenomenon.
Problem 5: If one insurance company charges both men and women the same price, how would this pricing strategy affect the long-term care insurance market in terms of consumers and premiums that can be charged?
Problem 6: What is the lemons principle? State where it is related to adverse selection or moral hazard and explain.