Suppose a patent applicant approaches an insurance company and seeks to purchase an insurance policy that her patent will not net 1m in the next three years. The insurance company
A) will sell her an insurance policy because the proposal entails uncertainty not risk.
B) will sell her an insurance policy because the proposal entails risk not uncertainty.
C) will not sell her an insurance policy because the proposal entails uncertainty not risk.
D) will not sell her an insurance policy because the proposal entails risk not uncertainty.
Question 2
What is one reason the federal government might bail out farmers in flood prone areas of the country?
A) Such flooding is not diversifiable and therefore only non-profit entities, such as the federal government, can cover the risks.
B) Such flooding is diversifiable, but insurance company CEOs are more concerned with their stockholder wealth than the well-being of farmers.
C) Such flooding is diversifiable, but the market for such insurance policies cannot clear without the assistance of the International Community.
D) Such flooding is known to happen on a regular basis and therefore there is no risk to be insured against.
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