-Which of the Following May Be Explained by Adverse Selection

question 24

Multiple Choice

-Which of the following may be explained by adverse selection?

• A)When banks raise the interest rate on loans, high-risk applicants leave the market.
• B)When health insurance companies decrease insurance charges but increase deductibles, less healthy people are more willing to purchase insurance.
• C)As the cost of insurance rises, low-risk applicants reduce their coverage.
• D)Products are sold at prices that reflect their true value.
• E)Loan companies do not require down payments.

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Definitions:

Good Business Writing

Refers to clear, concise, and purposeful writing tailored for business contexts, aimed at effectively conveying messages to stakeholders.

Payment

The action or process of paying someone or something, or the amount paid, typically in exchange for goods, services, or to fulfill a legal obligation.

Lee

A sheltered place away from the wind or a protective side, often used in nautical contexts.

Likelihood of Misunderstanding

The probability of misinterpreting information or communication.