When Bad Drivers Line Up to Purchase Collision Insurance,automobile Insurers

question 34

Multiple Choice

When bad drivers line up to purchase collision insurance,automobile insurers are subject to the

• A)moral hazard problem.
• B)adverse selection problem.
• C)assigned risk problem.
• D)ill queue problem.

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Definitions:

Market Failure

A situation where the allocation of goods and services by a free market is not efficient, often leading to negative externalities, underproduction, or overproduction.

Wasteful

Referring to the use or allocation of resources in an inefficient manner, leading to unnecessary loss or expenditure.

Interstate Highway

A network of controlled-access highways that form part of the National Highway System in the United States, facilitating interstate and long-distance travel.

Nonexcludability

A characteristic of public goods where it is impossible or highly costly to exclude individuals from consuming the good.