Explain why insurance companies usually do not offer earthquake insurance
What will be an ideal response?
Insurance companies diversify their risk by covering many people who mostly have uncorrelated expected losses. However, an earthquake usually causes losses to many people in an area. Thus earthquake losses are very much positively correlated and cannot be easily diversified. Insurance companies do not want to face losses they cannot easily diversify.
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The LM curve illustrates that when income increases, the
A) price level must increase to clear the asset market. B) real interest rate on nonmonetary assets must increase to clear the asset market. C) price level must increase to clear the goods market. D) real interest rate on nonmonetary assets must increase to clear the goods market.
The demand curve for human organs is upward sloping
a. True b. False Indicate whether the statement is true or false
Some people like blue jeans that fit tightly, and some prefer blue jeans with some give. These preferences for small differences in the same kind of product create opportunities for _______________ among the companies that produce them.
a. monopolies b. monopolistic competition c. perfect competition d. price fixing
It is costly to purchase a new car every two or three years because
A) the financing cost is significantly higher for a new car than for a used one. B) the gasoline tax for the fuel of a new car is generally higher than for a used one. C) the maintenance cost of a new car is generally higher than for a used one. D) a new car will depreciate rapidly in value during the first few years of use.