An efficient market for risk,such as an insurance market,is MOST likely to exist:
A)when there is a level playing field so that all participants have approximately the same wealth and the same degree of risk aversion.
B)when the sellers of insurance are risk-averse but the purchasers are not.
C)when there are significant differences between individuals' wealth levels and attitudes toward risk.
D)in the presence of private,or asymmetric,information.

Question

Quizplus · Accepted Answer

An efficient insurance market is likely to exist when there are significant differences in individuals' wealth levels and risk attitudes, as this creates opportunities for risk pooling and sharing, which is the essence of insurance.

An Efficient Market for Risk,such as an Insurance Market,is MOST