In a Perfect Market Without Other Frictions,insurance Companies Should Compete

question 25

Multiple Choice

In a perfect market without other frictions,insurance companies should compete until they are just earning a fair return and the NPV from selling insurance is ________.

• A) uncertain
• B) positive
• C) negative
• D) zero

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Definitions:

Defense Mechanism

Psychological strategies used unconsciously by individuals to protect themselves from anxiety and to cope with reality or maintain self-image.

Projection

A defense mechanism where individuals attribute their own unacceptable thoughts, feelings, or motives to another person.

Repression

A defense mechanism where unpleasant thoughts, feelings, or desires are unconsciously pushed out of conscious awareness.

Psychosexual Stage

A concept in Freudian psychology that describes five stages of child development, each characterized by a different focus of libido (sexual drive).