In an efficient allocation of risk:
A)all risk is eliminated.
B)those who are most willing to bear risk end up bearing it.
C)all risk is diversified.
D)all insurance premiums are equal to the expected value of the claims.

Question

Quizplus · Accepted Answer

In an efficient allocation of risk, those who are most willing to bear risk end up bearing it. This allows for a more optimal distribution of risk and a higher likelihood that risks are managed effectively. Eliminating all risk or diversifying all risk may not necessarily be efficient or desirable in all situations, and insurance premiums may not always be equal to the expected value of claims.

In an Efficient Allocation of Risk