Suppose there are two types of people: "good risks" who have 1 to 9 odds of falling ill, and "bad risks" who have a 1 to 3 odds of falling ill. If an insurance company cannot distinguish good risks from bad risks, what is the best way for it to deal with this problem?
a. Do not offer any insurance at 1 to 3 odds.
b. Make everyone purchase insurance that offers 1 to 3 odds.
c. Limit the amount of insurance that can be purchased at 1 to 9 odds.
d. Provide policies that offer 1 to 9 odds and 1 to 3 odds, allowing each group to purchase the appropriate policy.
c. Limit the amount of insurance that can be purchased at 1 to 9 odds.
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Suppose Island Bikes, a profit-maximizing firm, is the only bike rental company in a small resort town. The marginal cost to Island Bikes of renting out a bike is $3, and Island Bikes has no fixed costs. Each day Island Bikes has six potential customers, whose reservations prices are listed below.CustomerReservation Price($/Rental)A22B16C12D8E6F4 Suppose Island Bikes knows that customers whose reservation prices are at least $10 always rent bikes before noon, while those whose reservation prices are below $10 never do so. If Island bikes charges a different price in the morning and in the afternoon, then what will be the total economic surplus?
A. $49 B. $3 C. $9 D. $41
Playing the equilibrium of a one-stage game over and over again when the one-stage game is repeated is:
B. only a Nash equilibrium if the game is finite. C. only a Nash equilibrium if the game is infinite. D. dominated in some cases.
When economists say that private investment is "autonomous," they mean that it:
a. will never change. b. is not dependent on the current level of disposable income. c. is determined by the "animal spirits" of business decision makers. d. is determined by the level of saving.
Budget deficit
What will be an ideal response?