113 review questions copy

Fully insured agents will not take precautionary

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Unformatted text preview: in this case will be reflected in the fact that at any given price for insurance, A. the lowest risk agents will be most likely to purchase the insurance. B. the highest risk agents will be most likely to purchase the insurance. C. fully insured agents will not take precautionary action to prevent an accident. D. insurance buyers may purchase insurance from firms that will not be able to pay if faced with a large number of claims. 33. Adverse selection creates inefficiency because A. some buyers and sellers will receive less private surplus from a trade than they expected. B. social surplus is foregone when a mutually beneficial trade does not occur due to the asymmetry of information. C. regulation is required to deal with the problem. D. All of the above. 34. Moral hazard arises from asymmetric information about A. actions. B. characteristics. C. risk. D. All of the above. 35. Agents who are risk averse A. are indifferent to risk B. are willing to pay to accept risk C. are willing to pay to avoid risk D. None of the above. 36. Deductibles on insurance contracts are designed to A...
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