Which statement best characterizes the second-best policy offered by a monopoly insurer when it can't observe the consumer's risk?
a. It is a single contract offering partial insurance at an intermediate price such that all types are served.
b. It is a menu of contracts providing full insurance for the least risky types and partial insurance for higher risks.
c. It is a menu of contracts providing full insurance for the riskiest type and partial insurance at lower prices for lower risks.
d. The market breaks down since the monopolist cannot design contracts without observing each consumer's risk.
c
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Which of the following is a final good?
A) the memory chips in your new smart phone B) a share of IBM stock C) flour purchased at the store to bake cookies D) flour used by the bakery to bake cookies
Assume that the interest parity condition holds. Also assume that the U.S. interest rate is 6% while the U.K. interest rate is 8%. Given this information, financial markets expect the pound to
A) depreciate by 14%. B) depreciate by 2%. C) appreciate by 2%. D) appreciate by 6%. E) appreciate by 14%.