Author Question: When the monopoly insurer cannot observe the care taken by the insured party to avoid an accident, ... (Read 59 times)

mcmcdaniel · **on:** Jul 1, 2018

When the monopoly insurer cannot observe the care taken by the insured party to avoid an accident, the most profitable contract for it:
a. offers full insurance at a higher price than the full-information policy.
b. offers full insurance at a lower price than the full-information policy.
c. offers partial insurance at a higher price than the full-information policy.
d. offers partial insurance at a lower price than the full-information policy.

Question 2

The ways to address agency costs include all EXCEPT
a. running background checks on prospective employees
b. hiring only from job fairs
c. spot checks of the quality of employee work
d. replacing closed offices with cubical office spaces