Explain how the presence of asymmetric information in car insurance markets may lead people who are good drivers or even average drivers to choose not to buy car insurance unless the law requires it
Drivers (buyers and potential buyers of car insurance) know more about their driving habits than do the insurance companies (sellers of car insurance). The price of car insurance is likely to reflect the information asymmetry in that it incorporates more of a risk component than is really necessary to insure good and average drivers. Consequently, good and average drivers are priced out of the market and they rationally choose not to buy the insurance unless they are required to do so.
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Rate of return regulation will
a. always result in the firm producing the quantity that would be produced if the market were competitive. b. always result in the firm producing less than the quantity that would be produced if the market were competitive. c. always result in the firm producing more than the quantity that would be produced in a competitive industry. d. result in a new equilibrium with either more or loss produced in comparison to a competitive market.
The reason U.S. workers were better paid than foreign workers during the 1950s and 1960s is
A. U.S. workers were better trained and educated. B. U.S. workers worked harder. C. we had more capital (plant and equipment) per worker. D. the U.S. dollar was the world's strongest currency.
How do workers typically express self-interest?
A. By minimizing the economic losses of other business firms. B. By maximizing the economic profits of other business firms. C. By seeking jobs with the best combination of wages and benefits. D. By seeking the highest price when purchasing a consumer product.
Sydney Roofers Incorporated recently purchased 100 pounds of standard roofing nails from Lowes, a nationwide hardware and building supplies store. This transaction most likely involves:
A. contract or vertical integration. B. spot exchange. C. contract. D. vertical integration.