Carlos Has a Camera in His Car That Records Continuously

question 211

Essay

Carlos has a camera in his car that records continuously when the car is in motion. The insurance company gives his parents a discount for having the camera in his car. If the car makes a sudden motion, the recording is sent to an analyst at the insurance company, who determines if Carlos is engaging in risky behavior. The analyst gave Carlos a "D" grade for his driving. Carlos was shocked; he considers himself to be an above-average driver. His parents were not shocked. What aspect of behavioral economics might explain this situation?

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Definitions:

Expenses

Costs incurred in the process of earning revenue, typically categorized as fixed or variable costs.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, leading to net income or loss.

Owner's Equity

The residual interest in the assets of a business after deducting liabilities, representing the ownership interest of the shareholders or owner.

Revenues

The total income generated from the sale of goods or services related to a company’s primary operations.