Professional Documents
Culture Documents
3. An all-you-can-eat buffet attracts two types of customers. Regular customers value the buffet
at $20 and eat $5 of food in costs to the restaurant. Hungry customers value the buffet at $40
and eat $10 of food. If there are 100 of each type in the market for a buffet dinner, what is the
restaurant's profit?
a. $2,500
b. $3,000
c. $4,500
d. $6,500
4. To combat the problem of adverse selection, informed parties can employ techniques.
a. More; signaling
b. Less; signaling
c. Equally; screening
d. Equally; signaling
7. The demand for insurance arises primarily from people who are
a. Risk-seeking.
b. Risk-averse.
c. Risk-neutral.
d. None of the above
8. Which of the following is a potential solution to the adverse selection problem faced by
insurance companies?
a. Offer plans with different deductibles so that higher-risk customers accept higher deductibles.
b. Create a national database of customers that allows companies to look up each person's
historical risk.
c. Mandate that every person purchase insurance.
d. All of the above
ANSWER
https://solvedquest.com/multiple-choice-questions-1-an-insurance-company-offers-doctors-
malpractice/