Dan, age 19, may have trouble buying insurance at a low price because
A) the insurance company has private information that he is a risky driver.
B) the insurance company has private information that his signals are valid.
C) insurance companies fear that he has private information that his deductible is too high.
D) insurance companies fear that he has private information that he is a risky driver.

Question

Quizplus · Accepted Answer

Insurance companies may charge higher premiums to young drivers like Dan because they fear he might have private information about being a risky driver, leading to adverse selection.

Dan, Age 19, May Have Trouble Buying Insurance at a Low