1)The ability of insurance to spread risk is limited by

A. risk aversion and moral hazard.

B. risk aversion and adverse selection.

C. moral hazard and adverse selection.

D. risk aversion only.

2)The _____ problem occurs when consumers want to freely consume a public good that others have provided.

A. Coase

B. free-rider

C. pull-your-own

D. rival-good

1)The correct answer to the given question is option C. moral hazard and adverse selection.

A moral hazard in case of a health insurance is the scenario where there is information asymmetry between the insurer and subscriber after the transaction takes place. For example, the subscriber may start to consume more oily and fats-intensive foods after buying the insurance.

An adverse selection in case of health insurance is the scenario where there is information asymmetry between the insurer and subscriber before the transaction occurs. For example, the insurer might not be aware of the chronic diseases which the subscriber already has before providing the insurance.

2)

• The correct option is (B). Free-rider.

The free-rider problem is one of the major problems associated with the public good as the individuals/consumers who don't have paid for that public good must not be excluded from its consumption. This makes other individuals/consumers less incentivized to pay for providing a public good.