Mary is an 18-year-old student, who recently bought a used car Mary is looking to buy car insurance Insurance companies compete for her businessIs there an adverse selection problems in a transaction between Mary and an insurance company? Why or why not?Adverse selectionOA arises because Mary will drive in a careless manner as soon as she has auto insuranceOB. does not arise because auto-insurance companies know that 1 year-old girls are better risks than 10-year-old boysOC. is eliminated by auto-insurance companies insuring as many young drivers as possibleOD. does not arise because insurance companiOE arises because Mary knows if she is a safe or a risky overrecklessinsurance company does not know this

When one party has more information than the other, there is always asymmetric information, which…

Mary is an 18-year-old student who recently bought a used car Mary is looking to buy car insurance Insurance companies compete for her business is there an adverse selection problems in a transaction between Mary and an insurance company? Why or why not? Adverse selection OA arises because Mary will drive in a careless amer OB does not arise because auto-insurance companies know that 10-year-old girls are better risks than 10-year-old boys rance companies au because insurance companies assu OD. des impery

Mary is an 18-year-old student who recently bought a used car Mary is looking to buy car insurance Insurance companies compete for her business is there an adverse selection problems in a transaction between Mary and an insurance company? Why or why not? Adverse selection OA arises because Mary will drive in a careless amer OB does not arise because auto-insurance companies know that 10-year-old girls are better risks than 10-year-old boys rance companies au because insurance companies assu OD. des impery

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Alana wishes to obtain auto insurance. She wants 100/300/100 liability coverage, $250 deductible collision and full coverage comprehensive. She lives in territory 2 and has been assigned to driver class 2 with a rating factor of 1.25. Based on Table 19-6 and Table 19-7, what would be her total premium, if her three-year-old car were in model class L? (Round your answer to the nearest cent.) a. $355.00 b. $365.00 c. $456.25 d. $465.38
Does the risk correspond to the dispersion, or uncertainty, impossible outcomes?
Economics 2. Suppose that a farmer usually makes profit of $120,000 per year. Let's say that there is a 2% chance that a tornado will hit the farm. This would strongly hurt farmer's profit, leading to losses of $96,000 with 2% probability. a. What is the actuarially fair insurance? b. Assume that the farmer utility is given by u = 7 0.5 where 7t represents profit. What is the farmer's expected utility with no insurance? c. How much would the farmer be willing to pay to have insurance? d. Assume that the farmer expects that the tornado's effect to your farm is lower, only leading to losses of $70,000. i. What is the actuarially fair insurance? ii. What is the farmer's expected utility with no insurance? iii. How much would the farmer be willing to pay to have insurance? iv. What is the risk premium?
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An insurance company estimates that drivers have a 5% chance of getting into an accident that will cost the driver $10,000. There are two types of drivers: the ones with $50,000 in the bank and the ones with only $5,000. In case of an accident those with $5,000 will declare bankruptcy and creditors can only recover $5,000. What is the fair pair of insurance and will those with $5,000 in the bank buy it? Why?
Don't use chatgpt
#4. Without a vaccine, there is a 10% chance that Steven will get the coronavirus in 2021. If he gets vaccinated, that risk falls to 1%. Without a vaccines, Steven gets -6000 utils if he gets covid and 0 utils if he stays healthy. Because of side effects, he gets -100 utils from the vaccine if he stays healthy and -6100 if he gets sick anyways. What will Steven do? a. He will get vaccinated b. He will not get vaccinated c. He will get vaccinated if he is risk-averse but not if he is risk-loving d. He will get vaccinated if he is risk-loving but not if he is risk-averse
Before selling anyone a health insurance policy, theKramer Insurance Company requires that applicantsundergo a medical examination. Those withsignificant preexisting medical problems are chargedmore. This is an example ofa. moral hazard.b. adverse selection.c. signaling.d. screening.
12. True or False? Medicaid is a U.S. federal- and state- government-sponsored insurance program that provides insurance to people under age 65 whose incomes fall below a certain threshold (level). O True O False
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