An Insurance Company Is Likely to Attract Customers Like Clancy

question 16

Multiple Choice

An insurance company is likely to attract customers like Clancy, who wants to purchase insurance because he knows better than the company that he is more likely to make a claim on a policy.What is the term used to describe the situation above?

• A)moral hazard
• B)adverse selection
• C)asymmetric information
• D)economic irrationality

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Definitions:

Immunity

The ability of an organism to resist a particular infection or toxin by the action of specific antibodies or sensitized white blood cells.

White Blood Cells

Cells of the immune system that are involved in protecting the body against both infectious disease and foreign invaders.

Fibrinogen

A blood plasma protein that's critical in blood clot formation, converting to fibrin in the clotting process.

Albumins

The smallest of the plasma proteins. Albumins are important for pulling water into the bloodstream to help maintain blood pressure.