-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:

Consciousness

The condition in which an individual is conscious of and can contemplate their own being, feelings, ideas, environment, and so forth.

Future Aspirations

The hopes or ambitions of achieving something in the future.

Equivalence Principle

The continuing redistribution of energy within a personality; if the energy expended on certain conditions or activities weakens or disappears, that energy is transferred elsewhere in the personality.

Psychic Energy

A concept in psychoanalytic theory referring to the energy produced by instinctual drives and processes.