Which of the following is the best example of an "adverse selection" scenario (from a business perspective)?
A. An attorney engages in legally-risky tactics after discovering that a potential settlement is larger than was initially expected.
B. An employee begins stealing from the company after being passed over for a promotion.
C. A habitually reckless driver chooses not to buy auto insurance.
D. A person who drinks and smokes heavily conceals this information before buying health insurance.
Answer: A person who drinks and smokes heavily conceals this information before buying health insurance.
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Suppose a price index is formed to measure changes in the price level between 2005 to 2010. To form a Laspeyres price index, one would
a. compare the cost of the typical basket of goods purchased in 2005 with the cost of the typical basket of goods purchased in 2010. b. calculate the increase in the cost of the typical market basket purchased in 2005. c. calculate the increase in the cost of the typical market basket purchased in 2010. d. take the typical basket of goods purchased in 2007, and compare the costs of that basket in 2005 and 2010.
List and explain factors that determine the size of the expenditure multiplier in the expenditure model when prices are constant
What will be an ideal response?
Figure 8-1
Which graph in Figure 8-1 shows a typical firm’s total revenue and total cost curves?
A. (a) B. (b) C. (c) D. (d)
An investor is trying to decide whether to put his funds into stocks or bonds. He expects rising interest rates over the next year and higher inflation. Your advice?
What will be an ideal response?