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Questions and Answers
Which condition is necessary for the existence of efficient insurance supply?
Which condition is necessary for the existence of efficient insurance supply?
- Risk probability is greater than one
- There is no moral hazard (hidden action) (correct)
- Risk probability is unknown and cannot be estimated
- Probabilities of risks are not independent across individuals
What is a necessary condition for the existence of efficient insurance supply?
What is a necessary condition for the existence of efficient insurance supply?
- Probabilities of risks are independent across individuals (correct)
- Risk probability is strictly less than one
- Risk probability is unknown and cannot be estimated
- There is no adverse selection (hidden knowledge)
Which condition must be met for efficient insurance supply to exist?
Which condition must be met for efficient insurance supply to exist?
- Risk probability is known and could be estimated (correct)
- Risk probability is greater than one
- Probabilities of risks are not independent across individuals
- Adverse selection is present (hidden knowledge)
