7. An auto insurance company issues policies only after carefully screening an applicant's driving record. Those who have had many violations and/or accidents are either rejected or are insured at...

Extracted text: 7. An auto insurance company issues policies only after carefully screening an applicant's driving record. Those who have had many violations and/or accidents are either rejected or are insured at much higher rates. This is to deal with the insurance problem of a. Lack of economies of scale. b. Moral hazard. c. Adverse selection.