Question

A market equilibrium in which all types of individuals buy full insurance even though it is not fairly priced to all individuals is called a _________ equilibrium and occurs when all consumers are ___________.

Answer 1

Answer:

Group of choices:

A. pooling; separating

B. pooling; risk-averse

C. pooling; irrational

D. separating; not averse to risk

E. separating; risk-averse

The correct answer is B. pooling; risk-averse .

Explanation:

Market equilibrium is a situation that occurs when, at the prices it offers, those who buy or consume a good or service can purchase the quantities they want, and those who offer that good or service can sell all their stocks.

The quantity and the price that is set, is determined through the supply and demand curves of that good or service. If the price is very high, the producers or suppliers will be offering more than what is demanded, therefore, there will be quantities that they cannot sell, thus reducing their prices and their production. On the other hand, if the price is low, the quantities demanded will be higher than those offered, so there will be a shortage, and some consumers will be willing to pay more money for that good. The equilibrium point will be the one where the supply and demand curves intersect and, in turn, the prices and quantities are equalized.