In an Ad for Insurance, the Text Reads "Life's an Adventure

question 162

Multiple Choice

In an ad for insurance, the text reads "Life's an adventure, and there are plenty of perils awaiting your jewelry: a lost or broken stone, theft, accidental loss, damage, mysterious disappearance Have you thought about insurance?" How does the inclusion of accidental loss and mysterious disappearance create moral hazard?

• A) Individuals who purchase insurance are risk averse.
• B) Those who seek this jewelry insurance know that tend to lose their jewelry often.
• C) Once insured, some individuals wear their jewelry swimming, exercising, etc. where there is an increased risk of loss.
• D) Individuals who own jewelry know more about their risk than insurance company.

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Definitions:

Position

An investment holding that represents a partial ownership or obligation in a particular security or financial instrument.

Stock Index Futures

Futures contracts based on stock market indexes, allowing investors to speculate on the future value of the index or hedge against potential market movements.

Multiplier

A factor by which an increase in investment results in a greater increase in output.

Dollars

Dollars are a unit of currency used in the United States and other countries, serving as a medium of exchange, unit of account, and store of value.