If Reckless Drivers Are More Likely to Buy Automobile Insurance

question 19

Multiple Choice

If reckless drivers are more likely to buy automobile insurance than safe drivers are,

• A) a moral hazard has occurred.
• B) adverse selection has occurred.
• C) the market for insurance is efficient.
• D) then automobile insurance will be fairly priced.

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Definitions:

Single Purpose

Designed or intended for one specific use or objective.

Limited Time

A restricted period designated for a specific purpose or event.

Common Stockholders

Individuals or entities that own common shares in a corporation, entitling them to vote and share in the profits.

Preferred Stockholders

Individuals or entities that own preferred shares in a company, granting them certain advantages over common stockholders, such as priority in dividend payments and assets during liquidation.