Which of he following stalements about policy delivery is CORRECT? A.The producer should deliver lhe policy before lhe Free Look period expires B.The producer should deliver he policy in person and advise the insured to call the insurance company's home office if here are any questions. C.The producer should mail the policy to the insured to reduce the chance that the insured will reconsider and return the policy. D.The producer should explain the alicy to the insured to increase lhe chance that the insured will understand the policy's benefits and keep it.

Which of he following stalements about policy delivery is CORRECT? A.The producer should deliver lhe policy before lhe Free Look period expires B.The producer should deliver he policy in person and advise the insured to call the insurance company's home office if here are any questions. C.The producer should mail the policy to the insured to reduce the chance that the insured will reconsider and return the policy. D.The producer should explain the alicy to the insured to increase lhe chance that the insured will understand the policy's benefits and keep it.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter8: Market Failure

Section: Chapter Questions

Problem 10P

See similar textbooks

Similar questions

When company executives buy and sell stock basedon private information that they obtain as part oftheir jobs, they are engaging in insider trading.a. Give an example of inside information that mightbe useful for buying or selling stock.b. Those who trade stocks based on insideinformation usually earn very high rates ofreturn. Does this fact violate the efficient marketshypothesis?c. Insider trading is illegal. Why do you supposethat is?
HOW DO T-BILL YIELDS GO NEGATIVE? BY THE APLIA ECONOMICS CONTENT TEAM The week of September 15, 2008, was ripe with volatility in U.S. financial markets. Events unfolding in the wake of the mortgage crisis made investors extremely fearful. One result of this fear was a “flight to quality” as investors sought to avoid risk by moving their funds into the safest asset classes. U.S. Treasury securities (or “Treasuries,” as they’re commonly known) are one such asset class, considered to have virtually no risk. An article from the Associated Press (Madlen Read, “Treasures Dip on RTC Speculation, but Anxiety High,” September 18, 2008) discusses some of the factors that led investors to bid up the prices of 3-month United States Treasury bills (T-bills) to such an extent that their yields fell to a shockingly low level. Before 2008, the last time the T-bill yield was negative was 1940, in the early stages of World War II. According to the article: Heavy buying of the 3-month Treasury bill,…
**Practice** suppose that many insurance companies sell contracts of the following format:- The insurance premium P is the same for everyone in this market, regardless of the value of their cell phone. That’s because regulations prevent the companies from charging different premiums based on cell phone value. - If the cell phone is stolen, they get the value of the phone back (that is, Anne would get$700 from the insurance company if her phone were stolen, and Bob would get $600) Assume that the insurance companies are all risk-neutral and that market is competitive, and so the contract is such that the insurance companies have zero profits. Also assume that 50% of consumers in the market are identical to Anne, and 50% are identical to Bob. What is the actuarially fair premium and who buys the full insurance plan?a. The actuarially fair premium is 260 and only Bob buys itb. The actuarially fair premium is 130 and both Anne and Bob buy itc.The actuarially fair premium is 180 and both…
**Practice** suppose that many insurance companies sell contracts of the following format: - The insurance premium P is the same for everyone in this market, regardless of the value of their cell phone. That’s because regulations prevent the companies from charging different premiums based on cell phone value.- If the cell phone is stolen, they get the value of the phone back (that is, Anne would get $700 from the insurance company if her phone were stolen, and Bob would get $600) Assume that the insurance companies are all risk-neutral and that market is competitive, and so the contract is such that the insurance companies have zero profits. Also assume that 50% of consumers in the market are identical to Anne, and 50% are identical to Bob. Continue assuming that the insurance companies are risk-neutral and competitive, but now instead of assuming that the risks are correlated instead of independent. Specifically, suppose that with probability 0.2, a bandit group raids the city and…
When Shalini is sick, she values wealth according to the utility function US(w) = ln (w). When she is healthy, she values wealth according to UH(w) = 1.1 ln (w). Shalini allocates wealth of $1,000 for each week and has a 5% chance of getting sick. a) Would Shalini be willing to spend $30 of her of her $1,000 wealth in order to guarantee avoiding getting sick, if it were possible for her to do so? (b) Would Shalini be willing to spend $30 of her of her $1,000 wealth in order to buy an (actuarially fair) insurance policy under which she receives $600 in indemnity if she gets sick? (c) How do you explain your answers to parts a and b above? How do the answers compare and how you can intuitively explain them in this context?
Which of the following is the profit-maximizing approach to dealing with uncertainty? a)Base your decision on a simple average of the potential outcomes. b)Assume that the most likely state of the world will actually occur. c)Choose the potential outcome in the preferred state of the world and hope for the best. d)Make decisions that maximize expected profits
A. From the graph below explain how an insurance plan which provides the buyer a $15,000 wealth level, regardless of any uncertain event, is a good deal for the buyer? In other words, what does the distance between points D’ and C’ represent? Note we are referring to D prime, not D. B. Considering the graph below, can you explain the difference between expected utility and certainty utility?
Answer with a 1: not a problem of information asymmetry, 2: moral hazard, or 3: adverse selection a. Unrest in the Middle East causes oil speculators to buy up oil futures, driving gasoline prices higher. b. Karol is halfway to work before he realizes that he forgot to lock the back door. Because he has renter’s insurance, he decides it is not worth being late to work just to go home to lock the door. c. Joanne applies for a job as a part-time manager at a fast-food restaurant. Her MBA makes her incredibly overqualified for the job, yet the position goes to someone else who doesn’t even have a college degree. d. Frances lives in an apartment above a restaurant, and her apartment always smells like burgers and fries. She has tried unsuccessfully to get the restaurant owner to remedy the problem. e. The potential costs of long-term care (such as a nursing home stay) can be very high and are also very uncertain. Despite this, the private market for long-term care in the United States has…
Why is the economic indicator “consumer sentiment” relevant for making successful policy decisions?
What are the policy options for containing cost? What are cost-containing strategies used in the U.S.?
question 9 Consider the credit contract with collateral in the adverse selection problem from our class. The incentive compatibility constraint for the low risk type borrower states that obesvarad options a. The low risk type borrower is indifferent between applying for the low risk type credit contract and the high risk type credit contract. b. The low risk type borrower prefers applying for the low risk type credit contract over the non-participation c. The low risk type borrower only applies for the low risk type credit contract. d. The low risk type borrower derives higher utility than the risk type borrower. question 10 According to Diamond and Dybvig (1983), why does a bank run happen? options a. Because banks can have a liquidity problem without being insolvent. b. Because agents do not know their types at the beginning. c. (economic) interest. d. Because banks always need to borrow money to pay for the liquidity needs in period 1.
When frequency, asset specificity and uncertainty rise, what happens to the cost of using the market?