A recent spate of launching and operating mishaps with television satellites led to a corresponding surge in claims against companies underwriting satellite insurance. As a result, insurance premiums shot up, making satellites more expensive to launch and operate. This, in turn, has added to the pressure to squeeze more performance out of currently operating satellites. Which of the following, if true, taken together with the information above, best supports the conclusion that the cost of television satellites will continue to increase? Options: A . &nbspSince the risk to insurers of satellites is spread over relatively few units, insurance premiums are necessarily very high. B . &nbspWhen satellites reach orbit and then fail, the causes of failure are generally impossible to pinpoint with confidence. C . &nbspThe greater the performance demands placed on satellites, the more frequently those satellites break down. D . &nbspMost satellites are produced in such small numbers that no economies of scale can be realized. E . &nbspThe pricing method based on historical costing might not encourage the development of innovative weapons.

A recent spate of launching and operating mishaps with television satellites led

Question

A recent spate of launching and operating mishaps with television satellites led to a corresponding surge in claims against companies underwriting satellite insurance. As a result, insurance premiums shot up, making satellites more expensive to launch and operate. This, in turn, has added to the pressure to squeeze more performance out of currently operating satellites.
Which of the following, if true, taken together with the information above, best supports the conclusion that the cost of television satellites will continue to increase?

Options:

A . Since the risk to insurers of satellites is spread over relatively few units, insurance premiums are necessarily very high.

B . When satellites reach orbit and then fail, the causes of failure are generally impossible to pinpoint with confidence.

C . The greater the performance demands placed on satellites, the more frequently those satellites break down.

D . Most satellites are produced in such small numbers that no economies of scale can be realized.

E . The pricing method based on historical costing might not encourage the development of innovative weapons.

Answer: Option C
:
C
According to the passage, satellite mishaps caused a surge in insurance claims, which, in turn, caused increased insurance premiums. Higher premiums made the satellites more costly, resulting in increased performance demands. If C is true, the greater demands on performance will lead to further increases in costs by increasing the number of mishaps, and thus pushing insurance premiums still higher. Thus, C is the best answer. A and D bothdescribe factors relevant to costs, but there is no reason to think that the situation described in the passage will cause the costs resulting from these factors to increase. Similarly, the impossibility of pinpointing the cause of failure, mentioned in B, is consistent with the cost of satellites remaining stable.

Was this answer helpful ?

Next Question