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True/False and justify your answer. The index in an index insurance contract should be highly correlated with the actions that farmers take to reduce the
True/False and justify your answer.
- The index in an index insurance contract should be highly correlated with the actions that farmers take to reduce the probability of harvest failure.
- Household members tend to have different preferences, but empirical evidence shows that overall, most households are Pareto efficient.
- By increasing the interest rate, it is possible that a lender facing adverse selection may reduce her own expected profit.
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