Matty and Rudy Are the Same Age, Live in the Same

question 37

Multiple Choice

Matty and Rudy are the same age, live in the same town, and hold similar jobs a similar distance from their respective homes. They are so similar, in fact, that they are both offered the same auto insurance options. However, Matty has never been a particularly good driver, so he buys high-coverage auto insurance. Rudy, on the other hand, takes pride in being an excellent driver and thus only carries the minimum amount of insurance required. This example illustrates the potential for:

• A)risk pooling.
• B)risk aversion.
• C)adverse selection.
• D)diversification.

---

Definitions:

Social Security Administration

A U.S. government agency that administers social programs covering disability, retirement, and survivors' benefits.

Top Secret Documents

Highly sensitive government documents that require the highest level of security clearance to access due to national security implications.

Supreme Court

The highest judicial court in a country or state, often having the ultimate authority in interpreting laws and the constitution.

Federal District Court Judges

Officials appointed to preside over one of the 94 federal district courts in the United States, handling both civil and criminal cases.