Which of the Following Is a False Statement

question 45

Multiple Choice

Which of the following is a false statement?

• A) Risk averse people will pay an insurance premium that is greater than the mathematically fair chance of loss in order to relieve themselves of uncertainty.
• B) A risk seeker is willing to assume risk.
• C) The mathematically fair price for insurance is the objective risk for the insurer multiplied by the maximum possible loss.
• D) Insurance is never a mathematically fair trade because the insurer adds several operating and other costs to loss costs when it calculates the premium.

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Definitions:

Demand-Based Method

A method of price setting based on the demand for the product.

Yield Pricing

A pricing strategy in which prices are adjusted based on the demand and supply of goods or services to maximize revenue.

Theory of Constraints

A management philosophy focused on identifying and managing bottlenecks that limit a system's performance, effectiveness, or profit potential.

Product Cost Distortion

When the actual cost of a product is inaccurately allocated, leading to misleading cost information and potentially flawed pricing decisions.