Which of the Following Would Be Considered an Example of Adverse

question 62

Multiple Choice

Which of the following would be considered an example of adverse selection?

• A) Malpractice insurance may increase the amount of malpractice.
• B) Drivers may be less cautious because they have airbags installed in a car.
• C) Those individuals who most need insurance are the ones most likely to buy it.
• D) Work contracts that give a set number of sick-days may encourage more workers to call in sick.

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Definitions:

Break-Even Point

The level of production or sales at which total revenues equal total costs, resulting in zero profit.

Partial Moves

Actions or strategies that are implemented to a limited extent, often as a trial or preliminary step before full execution.

Margin of Safety

The difference between actual or projected sales and the break-even sales, indicating the risk cushion for not incurring losses.

Contribution Margin

The amount by which a product's sales price exceeds its variable costs, indicating how much it contributes to covering fixed costs and generating profit.