Score: 80/450 Question Value: 1 Car insurance companies hope that everyone drives safely. However, these companies are not getting the customers they prefer because of: adverse selection of buyers. pay-for-performance. the principal-agent problem. adverse selection of sellers.
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An insurance company insures many motorists, some who are very good drivers and some who are not so good. If it insures a motorist who then drives carelessly, is this an example of adverse selection or moral hazard?
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An unhealthy person would likely choose a medical insurance policy with a a. low premium and high deductible b. high premium and no deductible. c. high premium and a high deductible d. The unhealthy person would choose not to be insured. QUESTION 5 A safe driver would likely choose an auto insurance policy with a a. low premium and a high deductible b. high premium and a high deductible c. high premium and no deductible. d. high premium and a low deductible QUESTION 6 A home has been on the market for an extended amount of time without much interest from buyers. The sellers decide to purchase and include a home warranty insuring against major defects with the home. The warranty is an example of a(n) a. signal b. moral hazard c. screen. d. adverse selection QUESTION 7 Life insurance companies usually require applicants to have physicals and disclose information on their health. This practice is designed to address a. a problem involving hidden characteristics b. a principal-agent problem c. a moral-hazard problem d. all of the above are correct
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