Which of the Following Is True of Insurance

question 94

Multiple Choice

Which of the following is true of insurance?

• A) All risks are insurable.
• B) An insurance company only charges a fee for large businesses with over 100 employees.
• C) Insurance companies make profits by requiring a relatively large fee compared to the amount of loss that is possible.
• D) The insurance company makes a profit by collecting premiums from many businesses for the same set of risks.

---

Definitions:

Economic Profit

The variance between collective earnings and complete expenditures, encompassing both overt and covert costs.

Normal Profit

The minimum amount of profit needed for a company to remain competitive in the market; it equals the total opportunity costs of a firm.

Economic Profits

The surplus or profit earned by a firm or individual after accounting for both explicit and implicit costs.

Purely Competitive Industry

An industry characterized by many small firms producing identical products where no single firm can influence the market price.