Suppose an insurance company has estimated that 20 percent of all of its potential policy owners are high-cost and sets a price for their insurance policy with the understanding that 20 percent of its policy owners will be high-cost. If the true percentage of high-cost potential policy owners is 40 percent, the insurance company is likely to face ________.

A) moral hazard
B) the principal-agent problem
C) adverse selection
D) the bad apple problem


C) adverse selection

Economics

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To meet their obligation under the Kyoto Protocol, member countries of the European Union (EU) in 2005 devised

a. a universal carbon tax b. a GHG trading program c. an EU-wide subsidy program for electric cars d. none of the above

Economics

Refer to the above figure. Which panel demonstrates the law of supply?

A) Panel A
B) Panel B
C) Panel C
D) Panel D

Economics

It is generally true that elected officials find it easier to:

A. raise taxes and cut government spending. B. cut government spending. C. cut taxes. D. raise both taxes and government spending.

Economics

One of the main differences between the recent economic history of the high-performance Asian economies and most of the rest of the world is that growth in the Asian economies

A) increased in the 1960s. B) continued in the 1980s. C) slowed down in the 1960s. D) slowed down in the 1970s.

Economics