Multiple Choice
You offer an extended warranty for your product that is purchased by a few customers.If the product typically fails 2% of the time,the claim rate will exceed 2% of warranty purchasers because
A) adverse selection will lead those who are more reckless to purchase the warranty
B) moral hazard will lead those who purchase to be more reckless
C) you systematically underestimate product failure rates
D) Both A&B
Correct Answer:
Verified
Correct Answer:
Verified
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