Adverse Selection in Insurance Requires That

question 11

Multiple Choice

Adverse selection in insurance requires that

• A)all people face the same risk
• B)potential customers facing more risk are no more interested in purchasing insurance
• C)people are not risk averse
• D)insurers cannot tell higher risk people from lower risk people

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Definitions:

Average Weight

The mean mass of a group of objects or individuals, calculated by dividing the total weight by the number of objects or individuals.

Predictors

Variables or factors that are used in statistical models to forecast or estimate another variable of interest.

Best Predictor

A variable or factor that most accurately forecasts or indicates a specific outcome.

Linear Effects

The impact on a dependent variable that is directly proportional to the change in an independent variable.