In Reality Market Imperfections Exist That Can Raise the Cost

question 35

Multiple Choice

In reality market imperfections exist that can raise the cost of insurance above the actuarially fair price and offset some of these benefits.These insurance market imperfections include all of the following except

• A) adverse selection.
• B) agency costs.
• C) administrative and overhead costs.
• D) taxation of insurance payments.

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Definitions:

AGI

Adjusted Gross Income, which is gross income minus adjustments, serving as the basis for calculating taxable income on an individual's federal tax return.

Rental Loss

Occurs when the costs of maintaining and renting out a property exceed the income it generates, leading to a financial loss for the owner.

Standard Deduction

A fixed dollar amount that reduces the income on which you're taxed, varying by filing status, and claimed by those not itemizing deductions.

AMT Adjustments

Modifications required under the Alternative Minimum Tax rules to calculate certain items of income and deductions differently than for regular tax purposes.