An Efficient Market for Risk (Such as an Insurance Market)

Multiple Choice

An efficient market for risk (such as an insurance market) is most likely to exist:

A) when there is a level playing field, so that all participants have (approximately) the same wealth and the same degree of risk aversion.
B) when the potential sellers of insurance are risk-averse but the potential purchasers are not.
C) when there are significant differences between individuals' wealth levels and attitudes toward risk.
D) in the presence of private information.