How Much Insurance Would Be Needed in Order to Provide

question 90

Multiple Choice

How much insurance would be needed in order to provide for a family for 20 years if the pretax income necessary to cover living expenses is $50,000 and the money can be invested at 6%?

• A) $573,500
• B) $1,000,000
• C) $833,333
• D) $2,100,000

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Definitions:

Average Total Cost

The total cost of production (fixed and variable costs combined) divided by the number of units produced.

Minimum Efficient Scale

The smallest quantity of output at which long-run average cost reaches its lowest level, allowing a firm to fully exploit economies of scale.

Economies of Scale

The cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale.

Diseconomies of Scale

Increases in cost per unit when output is expanded, often due to inefficiencies arising from becoming too large.