(Solved):In the market for automobile insurance, asymmetric information occurs when: insured drivers drive more safely than uninsured drivers. insured drivers drive more recklessly than uninsured drivers. d… View Answer…

 

Question

In the market for automobile insurance, asymmetric information occurs when:

insured drivers drive more safely than uninsured drivers.

insured drivers drive more recklessly than uninsured drivers.

drivers with greater risk purchase more automobile insurance.

automobile insurance is universal.

 

EXPERT ANSWER

In the market for automobile insurance, asymmetric information occurs when insured drivers drive more recklessly than uninsured drivers.

This type of asymmetric information is called moral hazard. In insurance, moral hazard refers to a situation in which

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