Which Statement Best Characterizes the Second-Best Policy Offered by a Monopoly

Multiple Choice

Which statement best characterizes the second-best policy offered by a monopoly insurer when it can't observe the consumer's risk?

A) It is a single contract offering partial insurance at an intermediate price such that all types are served.
B) It is a menu of contracts providing full insurance for the least risky types and partial insurance for higher risks.
C) It is a menu of contracts providing full insurance for the riskiest type and partial insurance at lower prices for lower risks.
D) The market breaks down since the monopolist cannot design contracts without observing each consumer's risk.