Answer the following statement(s) true (T) or false (F)
1. Odds are said to be fair if they reflect the true probabilities of the various states of the world.
2. Risk aversion leads individuals to underinvest from a social point of view.
3. To deal with the problem of adverse selection, insurance companies may limit the amount of insurance that can be purchased at the most favorable odds.
4. An insurance company faces an adverse selection problem when people start taking additional risks after they acquire insurance.
5. A nuclear disaster is an uninsurable risk because it would adversely affect a large number of people simultaneously.
1. True
2. True
3. True
4. False
5. True
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The Soviet Union's economy grew rapidly in terms of GDP per hour worked in the 1950s, but eventually this growth slowed. Why did this occur?
A) Capital per hour worked grew rapidly from 1950 to 1980, but technological change occurred very slowly. B) The centrally planned economy invested too heavily in technological change. C) Increasing implementation of new technologies eventually suffered diminishing marginal returns. D) Capital per hour worked grew slowly, but technological change grew very rapidly.
A nominal wage is: a. always equal to the legal minimum wage
b. the same as the efficiency wage. c. measured in terms of the amount of goods and services it can purchase. d. measured in current dollars rather than in constant dollars. e. measured in constant dollars rather than in current dollars.
What is normal profit? How is it different from accounting profit?
Why is regulation necessary to achieve “universal service“?
What will be an ideal response?