Insurance companies try to mitigate the problem of adverse selection by:
A. charging a higher premium to groups with similar ages or behaviors that correlate with risky behavior.
B. asking potential customers a seemingly endless list of questions to gain as much information as they can about the person's risk characteristics.
C. charge a higher price to all individuals to cover the lack of information.
D. All of these statements are true.
Answer: D
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Government purchases
A) are determined by the public. B) are determined by the political process. C) are influenced by interest rates. D) are determined by suppliers.
A monopolist can sell 300 units of output for $45 per unit. Alternatively, it can sell 301 units of output for $44.60 per unit. The marginal revenue of the 301st unit of output is
a. -$120.00. b. -$75.40. c. -$0.40. d. $75.40.
Regulatory policies requiring lenders to extend more low down-payment loans to higher-risk borrowers along with the Fed's low short-term interest rate policy during 2002-2004 caused
What will be an ideal response?
Mr. Calhoun owned a worn-out piece of farmland for growing cotton, which he had been unable to rent for years. Suddenly he was getting offers from cotton farmers to lease his land. What is the most likely explanation of this?
A. The price of cotton went down. B. The physical productivity of the land went up. C. Taxes on land went up. D. The price of cotton went up.