If a Person Drives Less Carefully After Purchasing Automobile Insurance

question 31

Multiple Choice

If a person drives less carefully after purchasing automobile insurance,

• A) it is due to adverse selection.
• B) moral hazard exists.
• C) the person's insurance deductible must be large.
• D) the insurance company must have perfect information.

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Definitions:

Two-Income Families

Households in which both partners are employed, contributing to the family's total income and economic status.

Consumer Confidence

A measure of how optimistic consumers are about the overall state of the economy and their own personal finances.

Recession

A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

Direct Competition

A situation in which products that perform the same function compete against one another. Also called category competition or brand competition.