Multiple Choice
Use the following setup for question
Both Nadia and Samantha are applying to insure their car against theft.Nadia lives in a secure neighborhood,where the probability of theft is 10%.Samantha lives in a lesser secure neighborhood where the probability of theft is 25%.Both Nadia and Samantha own cars worth $10,000,and are willing to pay $100 over expected loss for insurance.
-One of the solutions to the adverse selection problem in insurance is
A) Is to require that only the high risk individuals to buy insurance
B) Is to require that only the low risk individuals buy insurance
C) Is to require everyone to buy insurance
D) Is to completely ban insurance companies
Correct Answer:
Verified
Correct Answer:
Verified
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