Scenario 17.4 Consider the Following Information

question 77

Multiple Choice

Scenario 17.4
Consider the following information:
StowUrStuff Storage is located slightly below sea level in a coastal town. It could build and maintain a flood control system around its property at an annual cost of $1000, and if it did so, the probability of a flood's doing $1,000,000 in damage during the year would be .005. With no flood control system, the probability of such a flood would be .01.
-Refer to Scenario 17.4. Moral hazard would be eliminated in this situation if:

• A) the insurer would always charge $5000.
• B) the insurer would always charge $10,000.
• C) the insurer could costlessly monitor whether a flood control system is in place, and adjust the premium upward if it is not.
• D) the insurer could costlessly monitor whether a flood control system is in place, and adjust the premium downward if it is not.
• E) the flood did not occur.

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Definitions:

Implicit Memory

A form of memory where past encounters assist in executing a task without actively remembering those past encounters.

Word Fragments

Incomplete segments of words used in psychological tests of memory, perception, or linguistic processing.

Procedural Memory

A subtype of long-term memory that involves the unconscious memory of how to perform different actions and skills.

Cerebral Trauma

Injury to the brain caused by an external force, potentially leading to temporary or permanent cognitive, physical, and psychosocial impairments.