Suppose that everybody pays the same price for auto insurance. What should happen to the price of insurance if the law changes from a system where there is mandatory auto insurance to one where there is voluntary auto insurance?
What will be an ideal response?
When auto insurance becomes voluntary, many safe drivers will exit the market because their expected costs are below their premiums when all risk is pooled. Therefore, a higher percentage of reckless drivers will remain. In this case, the price of insurance will rise.
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Holding other factors constant, an increase in the capital stock ________ the real wage and ________ employment.
A. increases; increases B. decreases; increases C. increases; does not change D. increases; decreases
Minimum wage laws cause unemployment because the legal minimum wage is set
A) below the market wage, causing labor demand to be greater than labor supply. B) too low. C) above the market wage, causing labor demand to be greater than labor supply. D) below the market wage, causing labor demand to be less than labor supply. E) above the market wage, causing labor demand to be less than labor supply.
Which of the following is correct?
A. In the short run, if a firm chooses to produce no output (i.e. shut down) its total costs of production will equal its total fixed costs. B. If a firm decides to shut down, its short-run total costs will equal 0 C. As a firm increases output in the short run, the change in total costs is equal to the change in total variable costs. D. A firm minimizes its total costs of production when average variable cost is minimized. Reset Selection
Capacity utilization increases. What is the impact on aggregate expenditures and income?
A) Both increase. B) Both decrease. C) Aggregate expenditure increases and income decreases. D) Aggregate expenditure decreases and income increases.