When the Monopoly Insurer Cannot Observe the Care Taken by the Insured

question 15

Multiple Choice

When the monopoly insurer cannot observe the care taken by the insured party to avoid an accident,the most profitable contract for it:

• A)offers full insurance at a higher price than the full-information policy.
• B)offers full insurance at a lower price than the full-information policy.
• C)offers partial insurance at a higher price than the full-information policy.
• D)offers partial insurance at a lower price than the full-information policy.

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Definitions:

Social Behaviour

Actions among individuals, shaped by social norms, cultures, and societal structures, that affect and are affected by others.

Motivated Group

A group of individuals with a high level of enthusiasm and willingness to achieve a common goal or task.

Assets

Resources or items of value owned by an individual or organization, which are expected to provide future economic benefits.