Suppose an Insurance Company Decided to Offer Divorce Insurance

question 103

Multiple Choice

Suppose an insurance company decided to offer divorce insurance. Based on the concept of moral hazard, economists would expect

• A) all married couples to purchase divorce insurance.
• B) no married couples to purchase divorce insurance.
• C) mostly the couples with marital problems to purchase divorce insurance.
• D) the divorce rate to decrease.

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Definitions:

Synergistic Gains

Benefits that result from the combination of two firms or entities, often leading to an increase in efficiency or value.

Acquisition

The process of obtaining control of another corporation or asset.

Divest

To sell off assets, investments, or divisions of a company, often for financial, ethical, or strategic objectives.

Newly Merged Firm

A company that has recently completed a merger, combining assets, liabilities, and operations with another firm.