Insurance companies are generally unwilling to insure the financial success of a small businesses because: a. The risk is pure and particular. b. All of the others. c. The risk involves moral hazard. d. The risk is particular to the individual.

Moral hazard is an important concern of insurance arrangements because the existence ofinsuranceA) provides increased incentives for risk taking.B) is a hindrance to efficient risk taking.C) causes the private cost of the insured activity to increase.D) creates an adverse selection problem but no moral hazard problem.

Which market failure can justify government provision of insurance: (a) Adverse selection* (b) Moral hazard (c) Adverse selection and moral hazard (d) None of the other answers

All of the following are true about insurance companies EXCEPT # randomize A. They invest their reserves. B. They may guarantee to reimburse lenders should lenders' loans go into default. C. They participate in equipment leasing. D. They may only invest their reserves in interest-paying bank accounts under Federal law.

People would most likely be able to justify the added cost of liability insurance in which situation?A.They own a business that could be the target of lawsuits.B.They have health problems and are often forced to miss work.C.They have a law degree and can defend themselves in court.D.They live in an area that often experiences hurricanes.SUBMITarrow_backPREVIOUS

Analyzing the Role of Insurance in Corporate Strategies