Screening

question 91

Multiple Choice

Screening

• A) leads to a pooling equilibrium in the insurance market.
• B) means an uninformed person passes knowledge to an informed person.
• C) makes no-claim bonuses unnecessary.
• D) explains why insurance companies offer low-premium, high-deductible policies and high-premium, low-deductible policies.
• E) makes the insurance market inefficient.

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Definitions:

Reversal

The process of undoing or nullifying a previous accounting entry or transaction.

Impairment Loss

The difference when the recorded value of an asset or a cash-producing entity surpasses the amount it can be recovered for.

Depreciable Asset

An asset that loses value over time due to wear and tear, obsolescence, or age, and for which depreciation can be applied.

Recoverable Amount

The higher of an asset’s fair value less costs of disposal and its value in use.