On car insurance policies, Countrywide Insurance Company offers drivers an option: Policy 1 features a deductible of $1,000, and it requires a driver to pay an annual premium of $500 . Policy 2 features a deductible of $250, and it requires a driver to pay an annual premium of $1,000
a. In offering these two policies, Countrywide is engaging in illegal price discrimination.
b. In offering these two policies, Countrywide is screening drivers.
c. Policy 1 is more of a burden for safe drivers than it is for risky drivers.
d. In offering these two policies, Countrywide is signaling their quality to drivers.
b
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Would a new growth theorist expect economic growth to be very rapid in one of the Communist nations before the fall of Communism? Why or why not?
What will be an ideal response?
Answer the following statement true (T) or false (F)
1) The limited money income of consumers results in a so-called budget constraint. 2) A rational consumer will cease purchasing a product at that quantity where marginal utility begins to diminish. 3) When a consumer is maximizing total utility, he or she cannot increase total utility by reallocating expenditures among different products. 4) When the price of a product falls, the income effect induces the consumer to purchase more of it while the substitution effect prompts her to buy less.
The franchising of fast-food restaurants would be an example of how a private business:
A. Overcomes market information problems B. Solves the moral hazard problem in insurance C. Expands the limits of the Coase theorem D. Corrects the problem of externalities
The problem of asymmetric information is that:
A. neither health care buyers nor providers are well-informed. B. health care providers are well-informed, but buyers are not. C. the outcomes of many complex medical procedures cannot be predicted. D. insurance companies are well-informed, but policy purchasers are not.