As It Applies to Insurance,the Adverse Selection Problem Is the Tendency

question 2

Multiple Choice

As it applies to insurance,the adverse selection problem is the tendency for

• A) those most likely to collect on insurance to buy it.
• B) those who buy insurance to take fewer precautions to avoid the insured risk.
• C) sellers to price-discriminate.
• D) sellers to restrict output and charge high prices.
• E) buyers opt for the cheapest deal even if they are under-insured.

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Definitions:

Par Value

The nominal or face value of a bond, stock, or coupon as indicated on a certificate or instrument.

Common Stock Dividends Distributable

A liability recognized on a company's balance sheet for dividends declared on common stock that have not yet been paid to shareholders.

Income Statements

Financial statements that show a company's revenue, expenses, and profit over a specific period.

Proprietorships

A type of business entity that is owned and run by one individual and where there is no legal distinction between the owner and the business.