If a State Requires All Drivers to Purchase Auto Insurance

question 156

Multiple Choice

If a state requires all drivers to purchase auto insurance, insurance companies still face the problem of

• A)correctly pricing their insurance.
• B)sunk costs.
• C)adverse selection.
• D)excess demand for their insurance.

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Definitions:

Normal Curve

A symmetrical, bell-shaped curve that describes the distribution of many types of data where most of the observations cluster around the mean.

Standard Deviation

A measure of the amount of variation or dispersion in a set of values, indicating how much the values differ from the mean of the set.

Scatterplot

A graphed cluster of dots, each of which represents the values of two variables. The slope of the points suggests the direction of the relationship between the two variables. The amount of scatter suggests the strength of the correlation (little scatter indicates high correlation).

Normal Curve

A bell-shaped curve that represents the distribution of many types of data where most values are close to the mean.