Which of the Following Statements Is Correct

question 72

Multiple Choice

Which of the following statements is correct?

• A)A high-risk person is more likely to apply for insurance than a low-risk person because a high-risk person would benefit more from insurance protection.
• B)A low-risk person is more likely to apply for insurance than a high-risk person because a low-risk person would benefit more from insurance protection.
• C)Insurance companies can fully guard against the problem of adverse selection,but they cannot fully guard against the problem of moral hazard.
• D)Insurance companies can fully guard against the problem of moral hazard,but they cannot fully guard against the problem of adverse selection.

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Definitions:

Per Unit

A term indicating the cost, price, or required quantity of something on an individual basis.

Outside Supplier

An external entity that provides goods or services to another company.

Indifferent

A state or condition where a decision-maker has no preference between two or more alternatives.

Subcomponent

A subcomponent is a constituent part that plays a role within a larger component or system, often essential for its functionality.