Why do insurance companies often find it necessary to purchase re insurance?
What will be an ideal response?
Reinsurance is purchased when insurance companies find themselves in basically one of two possible positions. The first of these is inadequate diversification for the risk assumed. For example, a company offering homeowners insurance may find that it has too many homes insured in Florida relative to other parts of the country and one major hurricane may deplete their resources. The second reason is somewhat related to the first in that the insurance company may find its resources (capital) inadequate for the total risk that it has assumed and that the expected losses may deplete its capital or put it at risk.
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The strategy of establishing a price that prevents the entry of new firms is called:
A. price leadership. B. a price war. C. setting a profit-maximizing price. D. limit pricing.
When a telemarketer calls you about a product, this is an example of
A) direct marketing. B) indirect marketing. C) searching for a good. D) persuasive marketing.
A decrease in demand will decrease prices least when supply is
A. inelastic (but not perfectly inelastic). B. perfectly inelastic. C. elastic. D. unit elastic.
The quintessential example for the price of another potential output and the impact of the price of one good on the market for another is
A. corn and soybeans. B. 7up and sprite. C. hotdogs and hotdog buns. D. crude oil and gasoline.