Chapter 14 - Imperfect Information: Adverse Selection and Moral Hazard - Exercises - 14.3 Adverse Selection for Sellers: Insurance - Page 335: 3.2

increases decrease increase increase

In an insurance market, the presence of high-cost consumers $\textbf{increases}$ the average cost of providing insurance. The resulting $\textbf{decrease}$ in the number of low-cost consumers $\textbf{raises}$ the average cost of providing insurance and $\textbf{raises}$ the price.