1. Assume that there are two types of driver: One is careful and has a 0.1% of being in an accident. The other type is careless and has a 1% chance of being in an accident. Assume that each type represents 50% of the population. If there is a law mandating that all drivers buy insurance that would cover $100,000 in damages, the actuarially far premium for all drivers would be ________ while if there were no such law, the fair premium would be __________. Group of answer choices A) $100, $1,000 B) $100, somewhere between $100 and $1,000 C) $550, somewhere between $550 and $1,000 D) $550, 1,000 Ans :- option c ). 2. The term(s) used to describe the problem(s) that make the actuarially fair premiums different in the two cases in the question above is(are) Group of answer choices A) Asymmetric information B) Moral hazard C) Adverse selection D) A, B, and C E) A and C
(Please answer 2nd question )
1. Assume that there are two types of driver: One is careful and has a 0.1% of being in an accident. The other type is careless and has a 1% chance of being in an accident. Assume that each type represents 50% of the population. If there is a law mandating that all drivers buy insurance that would cover $100,000 in damages, the actuarially far premium for all drivers would be ________ while if there were no such law, the fair premium would be __________.
Group of answer choices
A) $100, $1,000
B) $100, somewhere between $100 and $1,000
C) $550, somewhere between $550 and $1,000
D) $550, 1,000
Ans :- option c ).
2.
The term(s) used to describe the problem(s) that make the actuarially fair premiums different in the two cases in the question above is(are)
Group of answer choices
A) Asymmetric information
B) Moral hazard
C) Adverse selection
D) A, B, and C
E) A and C
Step by step
Solved in 2 steps
