The Figures Show Two Auto Insurance Markets, One Market for Safe

question 83

Multiple Choice

The figures show two auto insurance markets, one market for safe drivers and one market for aggressive drivers.
-In a separating equilibrium,there is ________ of insurance in the market for safe drivers,and there is ________ of insurance in the market for aggressive drivers.

• A) overprovision; underprovision
• B) overprovision; overprovision
• C) underprovision; underprovision
• D) underprovision; overprovision
• E) an efficient quantity; an efficient quantity

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Definitions:

Merchandise Inventory

Goods that a retail or wholesale company intends to sell to customers. The inventory account is adjusted based on purchases and sales.

Purchases Returns

Goods returned to the supplier from the buyer due to defects, inaccuracies in orders, or other reasons.

Sales Returns

Transactions where customers return previously purchased merchandise to the seller, resulting in a deduction from gross sales to arrive at net sales.

Purchases Returns

Goods returned by a buyer to the seller, often due to defects or dissatisfaction, resulting in a refund or credit.