Suppose There Are Two Types of People: "Good Risks" Who

question 57

Multiple Choice

Suppose there are two types of people: "good risks" who have 1 to 9 odds of falling ill,and "bad risks" who have a 1 to 3 odds of falling ill.If an insurance company cannot distinguish good risks from bad risks,what is the best way for it to deal with this problem?

• A) Do not offer any insurance at 1 to 3 odds.
• B) Make everyone purchase insurance that offers 1 to 3 odds.
• C) Limit the amount of insurance that can be purchased at 1 to 9 odds.
• D) Provide policies that offer 1 to 9 odds and 1 to 3 odds,allowing each group to purchase the appropriate policy.

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Definitions:

Secretary of State

A high-ranking official in the government responsible for conducting foreign affairs, and in some states, overseeing the electoral process and maintaining public records.

Gross Returns

The total amount of financial return on an investment before any deductions, such as expenses or taxes.

Rebuttable Presumption

A legal principle assuming certain facts are true until proven otherwise.

Partnership Funds

Resources or capital pooled together by partners in a partnership for the purpose of carrying out the partnership's business activities.