In a neighborhood where the price of houses are identical, the probability of a fire is identical, and the value of damage done by fires is identical, the risk premium for an insurance policy that repays all the cost of the fire damage does not vary across homeowners.
A. I and I are true.
B. I is true, and II is false.
C. I is false, and II is true.
D. I and II are false.
Answer:D
In a neighborhood where the price of houses are identical, the probability of a fire is identical, and the value of damage done by fires is identical, the risk premium for an insurance policy that repays all the cost of the fire damage does not vary across homeowners.
A. I and I are true. B. I is true, and II is false. C. I is false, and II is true. D. I and II are false.