For Which Binomial Distribution Would a Normal Approximation Be Most

question 20

Multiple Choice

For which binomial distribution would a normal approximation be most acceptable?

• A)n = 50, π = 0.05
• B)n = 100, π = 0.04
• C)n = 40, π = 0.25
• D)n = 400, π = 0.02

---

Definitions:

Demand Curve

A graph showing the relationship between the price of a good or service and the quantity demanded by consumers, typically downward sloping.

Adverse Selection

A situation in insurance and markets where buyers and sellers have different information, leading to transactions where the seller is more likely to sell a low-quality product.

Insurance

A financial product offering protection against a loss, providing compensation in the event of specific financial damages or risks occurring.

Adverse Selection

A situation where asymmetric information results in high-risk individuals being more likely to purchase insurance or contracts than low-risk ones.