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.
You might also like to view...
The change illustrated in the figure above can be the result of the Fed ________ government securities in the open market and will ultimately lead to ________ in aggregate demand
A) selling; an increase B) selling; no change C) buying; no change D) buying; an increase E) selling; a decrease
Because of specialization and comparative advantage, most people
a. consume only what they produce themselves b. consume the products produced by their family and friends c. consume the products of many other specialists d. do not use money as a medium of exchange e. share whatever they produce
A tax system in which the tax rate on everyone's first $10,000 of income is 10 percent, the tax rate on everyone's second $10,000 of income is 15 percent, and the tax rate on all income over $20,000 is 25 percent is a(n):
a. proportional tax. b. equitable tax. c. head tax. d. unit tax. e. progressive tax.
In 2013, federal government spending made up approximately __________ percent of GDP in the United States
A) 14 B) 23 C) 34 D) 44 E) 54