Explain the moral hazard that automobile insurance companies face. What methods do they employ to try to mitigate this problem? Explain carefully
What will be an ideal response?
Once people have acquired automobile insurance and know that when an accident occurs a third party (this case the insurance company) will pay the repair bill this might have the effect of people driving less carefully than otherwise. Automobile insurance companies can mitigate this somewhat by having people pay graduated deductibles. That is the insured is responsible for at least part of the repair bill. The less risk they wish to take in the form of a lower deductible will simply be built into a higher insurance premium and vice versa.
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The concept of cost-push inflation cannot be explained by the aggregate expenditure model
a. True b. False Indicate whether the statement is true or false
In the equation of exchange, "PQ" stands for
A) GDP. B) Real GDP. C) nominal investment. D) real investment.
Commitment devices are necessary when:
A. following through on a threat or promise is not in a player's best interest. B. people cannot correctly identify their dominant strategy. C. players cannot trust that other players will avoid playing a dominated strategy. D. commitments cannot be purchased.
If the price elasticity of demand for a good is less than one in absolute terms, we say consumers of this good
A) are not very sensitive to price. B) are not very sensitive to the quantity they demand. C) are very sensitive to price. D) are elastic.