When Bad Drivers Line Up to Purchase Collision Insurance,automobile Insurers

question 34

Multiple Choice

When bad drivers line up to purchase collision insurance,automobile insurers are subject to the

• A)moral hazard problem.
• B)adverse selection problem.
• C)assigned risk problem.
• D)ill queue problem.

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Definitions:

Break-even Point

The financial analysis point at which total revenues equal total costs, resulting in no profit or loss.

Target Profit

The anticipated profit a business aims to achieve within a specific period, guiding pricing and production decisions.

Contribution Margin Ratio

The proportion of sales revenue that exceeds variable costs, indicating the percentage of each sales dollar available to cover fixed costs and provide profit.

Fixed Monthly Expenses

Regular expenses that do not vary in amount from month to month, such as rent and salaries.