An insurance policy is a contract that:
a. benefits the parties if they have the same degrees of risk aversion.
b. benefits the parties if both of them are risk neutral.
c. benefits the parties if they have different degrees of risk aversion.
d. benefits the parties if either of them is risk neutral.
C
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Which of the following strategies will a government adopt to increase the production of a good?
a. An excise tax on producers b. An excise tax on consumers c. A subsidy to buyers d. A capital gains tax on producers
When economic growth is compared between countries, the best measure to use is
A. nominal GDP. B. real GDP. C. real GDP per capita. D. chain-weighted GDP.
Suppose all people have the same age-earnings profile and the percent of the population in each age category is the same. The distribution of income at any point in time will be
A. equal because incomes and wealth levels must then be the same. B. unequal because incomes differ by age. C. equal because all have the same profile. D. unequal because other sources of income will differ.
Potential income is that level of income that:
A. an economy is capable of producing without generating unemployment. B. the economy always produces. C. an economy is capable of producing without generating higher inflation. D. toward which the economy gravitates in the short-run.