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1. Market for Insurance a. Explain the supply and demand for insurance. Include the supply and demand/market equilibrium equation. (1 sentence) b. Using the supply
1. Market for Insurance
a. Explain the supply and demand for insurance. Include the supply and demand/market equilibrium equation. (1 sentence)
b. Using the supply and demand equation/ market equilibrium equation from class, explain when a market for insurance will not exist. (1 sentence)
c. Explain why someone's PMAX may be too low. (1 sentence)
2. R is a restauranter who purposefully sets fire to her failing restaurant to collect the property insurance claim money
. a. Explain the Requirement of an Insurable Risk that is being violated. (1-2 sentences)
b. Name and define the violation then explain it with respect to the requirement in part a. (Do not use the book definition.) (2-3 sentences)
c. Explain why there is no market for insurance if this violation is not managed. Be specific about which component of the gross premium is affected. Use the market equation in your answer. (1-2 sentences)
3. Most property insurance does not include coverage for a flood.
a. Explain the Requirements of Insurable Risk that would be violated if property insurance covered floods. (1-2 sentences)m b. Explain the violation. (1-2 sentences)
c. Explain what would happen to the private insurance market if property insurance did cover floods. Be specific about which component of the gross premium is affected. Use the market equation in your answer. (1-2 sentences)
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