(Solved): 6. Problems in insurance markets Consider the following story: Province Ranch, an industry leading ...

6. Problems in insurance markets Consider the following story: Province Ranch, an industry leading provider in vehicle insurance, recently expanded to cover motorhomes. Province Ranch had concerns that the most likely motorhome insurance customers are those who drive their motorhomes in high-density traffic areas (thus exposing them to the most damage on the road), because they would beneft most from insurance coverage. Since Province Ranch is unable to distingulsh perfectly between high-risk and low-risk areas, it raised its motorhome premiums in an effort to account for the riskier drivers. The economic problem in this story is known as: Moral hazard screening signaling Adverse selection