Question 1

Tom and Sarah are both 24 years old and looking for car insurance. While comparing numbers, they notice the car insurance premiums charged for young male drivers are higher than the premiums for young female drivers. This is due to the rule of indemnity.

Accepted Answer

A) True 
 B)False

Question 2

The chances of dying when young are much higher than the chances of becoming disabled when young.

Accepted Answer

A) True 
 B)False

Question 3

A terrorist attack is an example of pure risk.

Accepted Answer

A) True 
 B)False

Question 4

An example of an uninsurable risk would be the potential losses suffered by Patrick's Pizza Pies resulting from a popular new product from Paulie's Pizza Palace.

Accepted Answer

A) True 
 B)False

Question 5

If a pure risk occurs, a company loses money. However, if the events do not occur, the company gains nothing.

Accepted Answer

A) True 
 B)False

Question 6

Risk management is

Accepted Answer

A)   only a consideration to insurance companies.
B)   increasing in importance.
C)   decreasing in importance.
D)   used exclusively when engaging in global Internet business.E) None of the above
F) A) and C)

Question 7

A firm that chooses to self-insure and cover losses out of its budget is said to

Accepted Answer

A)   fly blind.
B)   roll boxcars.
C)   go bare.
D)   internalize risk.E) None of the above
F) A) and C)

Question 8

Amusement parks often have a minimum height restriction on some of their most thrilling rides. This risk management strategy is done in an effort to

Accepted Answer

A)   minimize the speculative risk associated with an injury.
B)   reduce the risk associated with a potential accident.
C)   self-insure against a catastrophic accident.
D)   create the perception of a more exciting ride.E) B) and D)
F) All of the above

Question 9

The federal government provides some insurance protection.

Accepted Answer

A) True 
 B)False

Question 10

Soap Stars, Inc. is ready to launch a new shampoo in the marketplace. They will incur a speculative risk.

Accepted Answer

A) True 
 B)False

Question 11

The beginning of an effective risk management strategy is a good loss-prevention program.

Accepted Answer

A) True 
 B)False

Question 12

The type of risk that is of most concern to businesspeople is speculative risk.

Accepted Answer

A) True 
 B)False

Question 13

The chance of a fire is an example of a pure risk.

Accepted Answer

A) True 
 B)False

Question 14

The ________ says that an insured person cannot collect more than the actual loss from an insurable risk.

Accepted Answer

A)   law of large numbers
B)   rule of indemnity
C)   law of diminishing returns
D)   rule of finite loss coverageE) A) and D)
F) C) and D)

Question 15

Typically, the only option that firms have to deal with pure risk is to buy insurance.

Accepted Answer

A) True 
 B)False

Question 16

________ is a term that refers to the chance of loss, the degree of probability of loss, and the amount of possible loss.

Accepted Answer

A)   Speculation
B)   Hazard
C)   Insurability
D)   RiskE) None of the above
F) C) and D)

Question 17

Pure risk involves the chance of either a profit or a loss.

Accepted Answer

A) True 
 B)False

Question 18

Explain the four ways of managing risk.

Accepted Answer

The four ways of managing risk include (...

Question 19

The management of risk is a small part of global business.

Accepted Answer

A) True 
 B)False

Question 20

Marshall Manufacturing has decided to stop producing football helmets due to the potential size of losses involved in product liability cases. This is an example of "avoiding risk" as an alternative risk management strategy.

Accepted Answer

A) True 
 B)False

Exam 23: Appendix: Managing Risk

The type of risk that is of most concern to businesspeople is speculative risk.

Correct AnswerverifiedShow Answer

Pure risk involves the chance of either a profit or a loss.

Correct AnswerverifiedShow Answer

Marshall Manufacturing has decided to stop producing football helmets due to the potential size of losses involved in product liability cases. This is an example of "avoiding risk" as an alternative risk management strategy.

Correct AnswerverifiedShow Answer

The management of risk is a small part of global business.

Correct AnswerverifiedShow Answer

A terrorist attack is an example of pure risk.

Correct AnswerverifiedShow Answer

The ________ says that an insured person cannot collect more than the actual loss from an insurable risk.

Correct AnswerverifiedShow Answer

The federal government provides some insurance protection.

Correct AnswerverifiedShow Answer

Typically, the only option that firms have to deal with pure risk is to buy insurance.

Correct AnswerverifiedShow Answer

The chances of dying when young are much higher than the chances of becoming disabled when young.

Correct AnswerverifiedShow Answer

Explain the four ways of managing risk.

Correct AnswerverifiedThe four ways of managing risk include (...View AnswerShow Answer

Amusement parks often have a minimum height restriction on some of their most thrilling rides. This risk management strategy is done in an effort to

Correct AnswerverifiedShow Answer

A firm that chooses to self-insure and cover losses out of its budget is said to

Correct AnswerverifiedShow Answer

________ is a term that refers to the chance of loss, the degree of probability of loss, and the amount of possible loss.

Correct AnswerverifiedShow Answer

An example of an uninsurable risk would be the potential losses suffered by Patrick's Pizza Pies resulting from a popular new product from Paulie's Pizza Palace.

Correct AnswerverifiedShow Answer

The chance of a fire is an example of a pure risk.

Correct AnswerverifiedShow Answer

Tom and Sarah are both 24 years old and looking for car insurance. While comparing numbers, they notice the car insurance premiums charged for young male drivers are higher than the premiums for young female drivers. This is due to the rule of indemnity.

Correct AnswerverifiedShow Answer

Risk management is

Correct AnswerverifiedShow Answer

Soap Stars, Inc. is ready to launch a new shampoo in the marketplace. They will incur a speculative risk.

Correct AnswerverifiedShow Answer

If a pure risk occurs, a company loses money. However, if the events do not occur, the company gains nothing.

Correct AnswerverifiedShow Answer

The beginning of an effective risk management strategy is a good loss-prevention program.

Correct AnswerverifiedShow Answer

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The four ways of managing risk include (...
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