(Figure: Fire Insurance) Lilly, who owns the Cigar Bar and Grill, is considering whether to purchase fire insurance. Without insurance, the marginal benefit of precautions to reduce the risk of fire is given by MB₁.Which of the following statements is (are) TRUE? I. With full insurance, the marginal benefit of acting to reduce the risk of fire is given by MB₃.
II) If Lilly purchases fire insurance, whether it is full or partial coverage, the marginal benefits of acting to reduce the risk of fire will increase.
III) With partial insurance, the marginal benefit of acting to reduce the risk of fire is given by MB₂.

Question

(Figure: Fire Insurance) Lilly, who owns the Cigar Bar and Grill, is considering whether to purchase fire insurance. Without insurance, the marginal benefit of precautions to reduce the risk of fire is given by MB₁.Which of the following statements is (are) TRUE?

I. With full insurance, the marginal benefit of acting to reduce the risk of fire is given by MB₃.
II) If Lilly purchases fire insurance, whether it is full or partial coverage, the marginal benefits of acting to reduce the risk of fire will increase.
III) With partial insurance, the marginal benefit of acting to reduce the risk of fire is given by MB₂.

Quizplus · Accepted Answer

The Answer of (Figure: Fire Insurance) Lilly, who owns the Cigar Bar and Grill, is considering whether to purchase fire insurance. Without insurance, the marginal benefit of precautions to reduce the risk of fire is given by MB₁.Which of the following statements is (are) TRUE? I. With full insurance, the marginal benefit of acting to reduce the risk of fire is given by MB₃. II) If Lilly purchases fire insurance, whether it is full or partial coverage, the marginal benefits of acting to reduce the risk of fire will increase. III) With partial insurance, the marginal benefit of acting to reduce the risk of fire is given by MB₂.

(Figure: Fire Insurance) Lilly, Who Owns the Cigar Bar and Grill