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

Grasp why self-liquidating loans are preferred by banks.

Know the effects of not taking prompt payment discounts on borrowing rates.

Recognize the role and risks of accruals in financial management.

Identify conservative versus aggressive working capital financing policies.

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Definitions:

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An economic diagram that maps out the journey of money as it passes through markets, involving both households and businesses.

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A venue or mechanism through which buyers and sellers interact to trade goods, services, or securities.