Chapter_19_The_Problem_of_Adverse_Selection 1. A risk averse individual a. values a lottery at more than its expected value b. values a lottery at exactly its expected value c. values a lottery ...

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Chapter_19_The_Problem_of_Adverse_Selection
1. A risk averse individual
a. values a lottery at more than its expected value
b. values a lottery at exactly its expected value
c. values a lottery at less than its expected value
d. tends to play lots of lotteries
ANSWER: c
TOPICS:
Section 1: Insurance and Risk
2. An individual who is a risk lover
a. values a lottery at more than its expected value
b. values a lottery at exactly its expected value
c. values a lottery at less than its expected value
d. tends to play lots of lotteries
ANSWER: a
TOPICS:
Section 1: Insurance and Risk
3. Someone who values a lottery at less than the expected value is

a. a risk lover
b. risk neutral
c. risk averse
d. one who tends to play lots of lotteries

ANSWER: c
TOPICS:
Section 1: Insurance and Risk

4. Someone who values a lottery at more than the expected value is

a. a risk lover
b. risk neutral
c. risk averse
d. one who tends to play lots of lotteries

ANSWER: a
TOPICS:
Section 1: Insurance and Risk

5. Most people buy insurance because they

a. are risk lovers
b. enjoy the gamble
c. are risk neutral
d. are risk averse

ANSWER: d

TOPICS:
Section 1: Insurance and Risk

6. Individuals who are more risk averse

a. buy less insurance
b. buy more insurance
c. are not more or less inclined to buy insurance
d. are philosophically opposed to insurance

ANSWER: b
TOPICS:
Section 1: Insurance and Risk

7. The reason some insurance customers are more eager to purchase insurance is

a. they are more risk averse
b. they are less risk averse
c. they have a greater risk of making a claim
d. Both A&C

ANSWER: d
TOPICS:
Section 1: Insurance and Risk

8. The following is not an example of risk aversion

a. you lock your garage when you have expensive workshop tools
b. you are more careful when you buy a more expensive car
c. Individuals tend to gamble more with their money when the future is uncertain
d. you only go swimming when the lifeguard is on duty

ANSWER: c
TOPICS:
Section 1: Insurance and Risk

9. The following is not an example of risk aversion

a. you don’t lock your garage when you have expensive workshop tools
b. you are more careful when you buy a more expensive car
c. Individuals tend to gamble more with their money when the future is certain
d. you only go swimming when the lifeguard is on duty

ANSWER: a
TOPICS:
Section 1: Insurance and Risk

10. The following is not an example of risk aversion

a. you lock your garage when you have expensive workshop tools
b. you are more careful when you buy a more expensive car
c. Individuals tend to gamble more with their money when the future is certain
d. you only go swimming when the lifeguard is not on duty

ANSWER: d
TOPICS:
Section 1: Insurance and Risk

11. Someone who values a lottery at its expected value is

a. A risk lov