Which of the Following Statements Is Correct

question 72

Multiple Choice

Which of the following statements is correct?

• A)A high-risk person is more likely to apply for insurance than a low-risk person because a high-risk person would benefit more from insurance protection.
• B)A low-risk person is more likely to apply for insurance than a high-risk person because a low-risk person would benefit more from insurance protection.
• C)Insurance companies can fully guard against the problem of adverse selection,but they cannot fully guard against the problem of moral hazard.
• D)Insurance companies can fully guard against the problem of moral hazard,but they cannot fully guard against the problem of adverse selection.

---

Definitions:

Product-level Activities

Operations or tasks that are performed specifically in support of producing a particular product, often influencing the cost associated with that product.

Departmental Overhead Rates

Rates used to allocate indirect costs to specific departments, based on departmental activities, to accurately assess their expenses.

Product Diversity

The range of different products or services that a company offers to meet varying customer needs and preferences.

Plantwide Predetermined Overhead Rate

A single overhead rate calculated by dividing total estimated overhead costs by an estimated allocation base for the entire plant.