Government mandating that every driver have a minimum amount of car insurance addresses the problem of:
A) moral hazard.
B) illegal screening.
C) adverse selection.
D) statistical discrimination.

Question

Quizplus · Accepted Answer

Government mandating that every driver have a minimum amount of car insurance addresses the problem of adverse selection. Adverse selection occurs when individuals who are at a higher risk of a certain event or activity are more likely to participate. In the case of car insurance, without a mandate, only high-risk drivers might choose to have insurance, leaving low-risk drivers without coverage, and increasing the costs for the insurer. Requiring all drivers to have insurance helps spread the risk and reduce costs.

Government Mandating That Every Driver Have a Minimum Amount of Car