With Moral Hazard,fair Insurance Contracts Are Not Viable Because

question 1

Multiple Choice

With moral hazard,fair insurance contracts are not viable because

• A)individuals' aversion to risk is reduced.
• B)insurance company's administrative costs are increased.
• C)individuals fear unscrupulous agents.
• D)probabilities of loss are increased over what is expected.

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Definitions:

Activity Cost Pools

Aggregations of all the overhead costs associated with specific activities, used in activity-based costing.

Customer Margin

The profit generated from a particular customer, calculated by subtracting the costs associated with serving that customer from the revenue they generate.

Serving Customers

The activities involved in providing products or services to customers effectively.

Activity Cost Pools

Accumulations of costs grouped by similar or related activities, used in activity-based costing to allocate costs more accurately.