Problem
Some people have argued that mandatory health insurance could reduce health-care costs. Explain this argument. What problem would mandatory coverage not solve that could undermine cost savings?
In which of the following situations is an information asymmetry likely to cause problems?
a. Cab drivers know the shortest route to any destination better than their passengers do.
b. Managers can't always supervise members of their sales staff, who work on commission. (That is, staff members receive a percentage of the total value of the sales they make.)