What Is a Potential Advantage of a Partial Experience Rating

question 22

Multiple Choice

What is a potential advantage of a partial experience rating over a full experience rating of insurance?

• A) Moral hazard costs are lower with partial experience rating.
• B) Adverse selection is less likely with partial experience rating.
• C) It helps insure firms against downturns.
• D) Partial experience rating is fairer to efficient firms.

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Definitions:

Total Revenue

The combined sum of earnings a company receives for its goods sold and services rendered over a particular time span.

Standardized Product

Goods or services that are uniform in quality and performance, allowing them to be interchangeable.

Perfect Competition

A market structure characterized by a large number of small firms, identical products, and ease of entry and exit, leading to no single firm influencing the market price.

Many Buyers

A market condition where there are numerous consumers for a product, enhancing competition and potentially reducing prices.