If a State Requires All Drivers to Purchase Auto Insurance

question 156

Multiple Choice

If a state requires all drivers to purchase auto insurance, insurance companies still face the problem of

• A)correctly pricing their insurance.
• B)sunk costs.
• C)adverse selection.
• D)excess demand for their insurance.

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Definitions:

Volatile Demand

Demand for a product or service that experiences frequent, unpredictable changes often leading to challenges in inventory management and production planning.

Stable Demand

Describes a market condition where the demand for a particular product or service remains consistent over time.

Static Budget

A budget that does not change or adapt with variations in sales volume or business activity levels, typically set for a specific period.

Flexible Budget

A budget that adjusts or flexes with changes in volume or activity.