"Independence" in an Insurance Pool Means

question 11

Multiple Choice

"Independence" in an insurance pool means:

• A) the bad risks pay more for insurance than good risks
• B) the members of the pool exhibit the same level of risk
• C) those who experience losses have their premiums raised
• D) the occurrence of one event makes it neither more nor less probable that the other occurs

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Definitions:

Binding Price Floor

A price floor set above the equilibrium price, causing a surplus by legally preventing the price from falling to its natural equilibrium level.

Surplus

The situation in which the quantity supplied of a good exceeds the quantity demanded, often leading to a drop in prices.

Equilibrium Price

Equilibrium price is the market price at which the quantity of goods supplied is equal to the quantity of goods demanded.

Government Implementation

The process by which government agencies put laws, regulations, or policies into practice.