Scenario 17.3 Consider the Following Information

question 67

Multiple Choice

Scenario 17.3
Consider the following information:
The probability of a fire in a factory without a fire prevention program is 0.01. The probability of a fire in a factory with a fire protection program is 0.001. If a fire occurred, the value of the loss would be $300,000. A fire prevention program would cost $80 to run.
-Refer to Scenario 17.3. If the fire protection program were not in place, the insurer would not be willing to ensure the warehouse for any amount less than:

• A) $80.
• B) $300.
• C) $3,000.
• D) $6,000.
• E) $300,000.

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Definitions:

Business Cycle

The fluctuations in economic activity that an economy experiences over a period of time, marked by periods of expansion and contraction in GDP.

Fiscal Drag

The negative effect on disposable income and aggregate demand when taxes do not fall in line with inflation, effectively increasing the tax burden.

Classical Economists

Economists who believe in self-regulating markets where competition leads to efficient outcomes without government intervention.

Investment

The act of allocating resources, often financial, into something expecting it to generate income or profit.