Pricing Insurance Policies Is Made Difficult Because Buyers Have More

question 79

Multiple Choice

Pricing insurance policies is made difficult because buyers have more information than sellers.This difficulty is an example of

• A)moral hazard.
• B)adverse selection.
• C)asymmetric information.
• D)the free-rider problem.

---

Definitions:

Dividends

Payments made to shareholders out of a company's profits.

Steady Source

A consistent and reliable means of obtaining something, such as income or information.

Clientele Argument

A theory suggesting that companies attract investors whose preferences align with the company's policies regarding dividends, financing, and investment.

Dividend Theory

A set of principles and theories that explain the rationale and effects of dividend policies on an organization's value and shareholders' wealth.