Question 1

A mutual insurance company is a nonprofit organization.

Accepted Answer

A) True 
 B)False

Question 2

Explain the four ways of managing risk.

Accepted Answer

The four ways of managing risk include (

Question 3

Insurance companies will provide coverage only for losses that are accidental.

Accepted Answer

A) True 
 B)False

Question 4

Simon owns several gas stations. He realizes that among the several risks associated with this type of business is the risk of minor damage to cars from dirty or contaminated fuel. He also knows that there is a small chance of a major loss if a fire occurred at one of his gas stations. Simon wants to control his insurance costs while still maintaining a reasonable risk management program. He is considering self-insurance. If he decides to use this approach, he will probably

Accepted Answer

A)  rely entirely on a strategy of risk avoidance. 
B)  decide to cover both types of risk himself. 
C)  decide to self-insure for the smaller, more routine, losses associated with the damage caused by dirty or contaminated fuel, but seek coverage from an insurance company for the potentially much larger loss from a fire. 
D)  decide to cover the risk of fire himself, and take out an insurance policy to cover the risk of contaminated fuel. 
A)  rely entirely on a strategy of risk avoidance. 
B)  decide to cover both types of risk himself. 
C)  decide to self-insure for the smaller, more routine, losses associated with the damage caused by dirty or contaminated fuel, but seek coverage from an insurance company for the potentially much larger loss from a fire. 
D)  decide to cover the risk of fire himself, and take out an insurance policy to cover the risk of contaminated fuel.

Question 5

Any risk is insurable as long as you can pay the premium.

Accepted Answer

A) True 
 B)False

Question 6

Insurance companies make predictions such as how recent health trends will affect the number of heart attacks that men in the United States over the age of 45 will suffer.

Accepted Answer

A) True 
 B)False

Question 7

It's good advice for doctors and lawyers to carry malpractice insurance.

Accepted Answer

A) True 
 B)False

Question 8

The National Highway Traffic Safety Administration (NHTSA) provides consumers with recall notices for all makes and models of cars, trucks, motorcycles, and even school buses. In terms of risk management, the purpose of the NHTSA service is

Accepted Answer

A)  to reduce risk. 
B)  to avoid risk. 
C)  to self-insure against risk. 
D)  to make available the opportunity for vehicle owners to purchase insurance against risk. 
A)  to reduce risk. 
B)  to avoid risk. 
C)  to self-insure against risk. 
D)  to make available the opportunity for vehicle owners to purchase insurance against risk.

Question 9

John is part of a highway construction crew and frequently handles explosives. His friend Don is a bookkeeper for a retail store. The amount of workers' compensation premiums paid by John's employer will probably exceed the premiums paid by Don's employer.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Businesses can often reduce the risk to which they are exposed.

Accepted Answer

A) True 
 B)False

Question 12

Some companies are avoiding risk through the use of product recalls.

Accepted Answer

A) True 
 B)False

Question 13

An insurance premium is the fee charged by the insurance company in return for their promise to pay for all or part of a loss.

Accepted Answer

A) True 
 B)False

Question 14

An insurance company would not be willing to insure a risk if it

Accepted Answer

A)  results from political disruptions. 
B)  has a measurable loss. 
C)  results from an accident. 
D)  has a low probability of occurring. 
A)  results from political disruptions. 
B)  has a measurable loss. 
C)  results from an accident. 
D)  has a low probability of occurring.

Question 15

A well-designed and implemented risk-prevention program can eliminate the potential of loss.

Accepted Answer

A) True 
 B)False

Question 16

A mutual insurance company is owned by its policyholders.

Accepted Answer

A) True 
 B)False

Question 17

Which type of risk management strategy is a company using when it installs mirrors and surveillance cameras to spot and prevent shoplifting?

Accepted Answer

A)  avoiding the risk 
B)  insuring against the risk 
C)  assuming the risk 
D)  reducing the risk 
A)  avoiding the risk 
B)  insuring against the risk 
C)  assuming the risk 
D)  reducing the risk

Question 18

________ risk involves the threat of loss with no chance for profit.

Accepted Answer

A)  Minimum 
B)  Pure 
C)  Speculative 
D)  Managed 
A)  Minimum 
B)  Pure 
C)  Speculative 
D)  Managed

Question 19

Sadly, during a war many civilians watch as everything they have is destroyed. Insurance companies will view this type of loss as

Accepted Answer

A)  an insurable risk. 
B)  an uninsurable risk. 
C)  a demonstration of the law of large numbers. 
D)  a rule of indemnity. 
A)  an insurable risk. 
B)  an uninsurable risk. 
C)  a demonstration of the law of large numbers. 
D)  a rule of indemnity.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 23: Managing Risk

A mutual insurance company is a nonprofit organization.

Explain the four ways of managing risk.

Insurance companies will provide coverage only for losses that are accidental.

Any risk is insurable as long as you can pay the premium.

Insurance companies make predictions such as how recent health trends will affect the number of heart attacks that men in the United States over the age of 45 will suffer.

It's good advice for doctors and lawyers to carry malpractice insurance.

The National Highway Traffic Safety Administration (NHTSA) provides consumers with recall notices for all makes and models of cars, trucks, motorcycles, and even school buses. In terms of risk management, the purpose of the NHTSA service is

John is part of a highway construction crew and frequently handles explosives. His friend Don is a bookkeeper for a retail store. The amount of workers' compensation premiums paid by John's employer will probably exceed the premiums paid by Don's employer.

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

Businesses can often reduce the risk to which they are exposed.

Some companies are avoiding risk through the use of product recalls.

An insurance premium is the fee charged by the insurance company in return for their promise to pay for all or part of a loss.

An insurance company would not be willing to insure a risk if it

A well-designed and implemented risk-prevention program can eliminate the potential of loss.

A mutual insurance company is owned by its policyholders.

Which type of risk management strategy is a company using when it installs mirrors and surveillance cameras to spot and prevent shoplifting?

________ risk involves the threat of loss with no chance for profit.

Sadly, during a war many civilians watch as everything they have is destroyed. Insurance companies will view this type of loss as

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

Taking Risks and Making Profits Within the Dynamic Business Environment

Understanding Economics and How It Affects Business

Doing Business in Global Markets

Demanding Ethical and Socially Responsible Behavior

How to Form a Business

Entrepreneurship and Starting a Small Business

Management and Leadership

Structuring Organizations for Todays Challenges

Production and Operations Management

Motivating Employees

Human Resource Management: Finding and Keeping the Best Employees

Dealing With Employeemanagement Issues

Marketing: Helping Buyers Buy

Developing and Pricing Goods and Services

Distributing Products

Using Effective Promotions

Understanding Accounting and Financial Information

Financial Management

Using Securities Markets for Financing and Investing Opportunities

Money, Financial Institutions, and the Federal Reserve

Working Within the Legal Environment

Using Technology to Manage Information

Managing Personal Finances

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