Why Would the Owners of a Successful Business Operation Carry

question 38

Multiple Choice

Why would the owners of a successful business operation carry life insurance on the lives of its shareholders?

• A) to ensure that the business doesn't suffer financial loss from business interruption
• B) to offset any deficiency in the value demanded for the deceased's shares
• C) to offset the challenging costs of buying out a deceased shareholder's shares
• D) to comply with the law's mandatory life insurance pertaining to shareholders

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Definitions:

Substitution Effect

The economic understanding that as prices rise or income decreases, consumers will replace more expensive items with less costly alternatives.

Budget Constraint

A financial limit that represents the combination of goods and services a consumer can purchase with their limited income.

Labor Supply Curve

A graphical representation showing the relationship between the quantity of labor willing to work and the wage rate.

Indifference Curves

A graphical representation used in economics to show different combinations of two goods that give a consumer equal satisfaction and utility.