Explain why insurance companies usually do not offer earthquake insurance
What will be an ideal response?
Insurance companies diversify their risk by covering many people who mostly have uncorrelated expected losses. However, an earthquake usually causes losses to many people in an area. Thus, earthquake losses are very much positively correlated and cannot be easily diversified. Insurance companies do not want to face losses they cannot easily diversify.
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In the prisoner's dilemma game, the sentence that each player receives depends on
a. neither strategy chosen b. only the strategy the player chooses c. only the strategy the other player chooses d. the strategy the player chooses and on the strategy the other player chooses e. None of the answers is correct.
Production of a small quantity of an input is often ________ as firms typically ________ able to enjoy economies of scale.
A) profitable; are B) profitable; are not C) unprofitable; are not D) unprofitable; are