Less skillful drivers are more likely to buy auto insurance with lower deductibles. Economists use this as an example of:
A. information optimization.
B. adverse selection.
C. asymmetric selection.
D. moral hazard.
Answer: B
You might also like to view...
Suppose that Bill is a big movie buff and enjoys renting movies from the local video rental outlet
Assume that he is willing to pay $5 for the first movie he rents for the weekend but would only pay $4 for a second and still only $3 for a third movie. If the video rental franchise charges $3.50 per movie what will Bill's consumer surplus be and why? Assume now that the video rental franchise now has a new package deal in which it offers to rent three movies to customers at a price of $9.00 would Bill be interested? How much consumer surplus would he enjoy now? What is the maximum price that the video rental franchise could charge and still make Bill interested in the package deal?
How do commercial banks solve asymmetric information problems?
What will be an ideal response?
Which term refers to a rule that every imported product must be opened by hand and inspected with a magnifying glass, by one of just three government inspectors available at any given time?
a. a non-tariff barrier b. a quota c. a government bureaucracy d. an import quota
If demand is perfectly elastic, the demand curve is horizontal, and the price elasticity of demand equals 1
a. True b. False Indicate whether the statement is true or false