MB, MC 10- 8- 6 4 Reference: Ref 16-2 MB₂ Select one: A. III B. I MB, C. II D. I and III MB 10 (Figure 16.2) Lilly, who owns the Cigar Bar and Grill, is considering whether to purchase fire insurance. Without insurance, the marginal benefit of precautions to reduce the risk of fire is given by MB₁. Which of the following statements is (are) TRUE? I. With full insurance, the marginal benefit of acting to reduce the risk of fire is given by MB3. Quantity of actions taken to improve fire protection II. If Lilly purchases fire insurance, whether it is full or partial coverage, the marginal benefits of acting to reduce the risk of fire will increase. III. With partial insurance, the marginal benefit of acting to reduce the risk of fire is given by MB2.

MB, MC 10- 8- 6 4 Reference: Ref 16-2 MB₂ Select one: A. III B. I MB, C. II D. I and III MB 10 (Figure 16.2) Lilly, who owns the Cigar Bar and Grill, is considering whether to purchase fire insurance. Without insurance, the marginal benefit of precautions to reduce the risk of fire is given by MB₁. Which of the following statements is (are) TRUE? I. With full insurance, the marginal benefit of acting to reduce the risk of fire is given by MB3. Quantity of actions taken to improve fire protection II. If Lilly purchases fire insurance, whether it is full or partial coverage, the marginal benefits of acting to reduce the risk of fire will increase. III. With partial insurance, the marginal benefit of acting to reduce the risk of fire is given by MB2.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter16: Information, Risk, And Insurance

Section: Chapter Questions

Problem 11RQ: What is an actuarially fair insurance policy?

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Question

MB, MC
10-
8.
6
4
2.
Reference: Ref 16-2
O
MB,
Select one:
A. III
B. I
MC
MB₁
MB3
(Figure 16.2) Lilly, who owns the Cigar Bar and Grill, is considering whether to purchase fire
insurance. Without insurance, the marginal benefit of precautions to reduce the risk of fire is given
by MB₁. Which of the following statements is (are) TRUE?
I.
With full insurance, the marginal benefit of acting to reduce the risk of fire is given
by MB3.
C. II
D. I and III
10
II.
If Lilly purchases fire insurance, whether it is full or partial coverage, the marginal
benefits of acting to reduce the risk of fire will increase.
Quantity of actions taken
to improve fire protection
III. With partial insurance, the marginal benefit of acting to reduce the risk of fire is
given by MB₂.

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