Question 1

Risks such as global warming are the concern of businesses and governments primarily in the U.S.

Accepted Answer

A) True 
 B)False

Question 2

________ insurance guarantees payment of wages, medical care, and rehabilitation services for employees who are injured on the job.

Accepted Answer

A)  Product liability 
B)  Workers' compensation 
C)  Professional liability 
D)  Malpractice 
A)  Product liability 
B)  Workers' compensation 
C)  Professional liability 
D)  Malpractice

Question 3

Demetrius was turned down when he attempted to buy a life insurance policy on his former Introduction to Business instructor. The most likely reason the insurance company turned down his attempt to insure the life of his former instructor was that:

Accepted Answer

A)  the chance of the loss could not be measured. 
B)  he did not have an insurable interest in the instructor's life. 
C)  the instructor had already taken out a policy. 
D)  the loss would not be accidental. 
A)  the chance of the loss could not be measured. 
B)  he did not have an insurable interest in the instructor's life. 
C)  the instructor had already taken out a policy. 
D)  the loss would not be accidental.

Question 4

Outsourcing helps some companies avoid risk.

Accepted Answer

A) True 
 B)False

Question 5

The premium charged for workers' compensation insurance is the same for all workers, regardless of their occupation.

Accepted Answer

A) True 
 B)False

Question 6

All-Star 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 a risk management strategy.

Accepted Answer

A) True 
 B)False

Question 7

Some businesses will set aside money to cover routine losses and buy "catastrophe" policies to cover big losses. This is an example of which of the following?

Accepted Answer

A)  Avoiding the risk 
B)  Self-insuring against the risk 
C)  Reducing the risk 
D)  A loss-prevention program 
A)  Avoiding the risk 
B)  Self-insuring against the risk 
C)  Reducing the risk 
D)  A loss-prevention program

Question 8

The Pension Benefit Guaranty Corporation provides retirement benefits, life insurance, health insurance, and disability income insurance.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Sadly, during a war many civilians watch everything they have 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 11

An insurance policy is a written contract.

Accepted Answer

A) True 
 B)False

Question 12

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

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

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 15

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. 
A)  fly blind. 
B)  roll boxcars. 
C)  go bare. 
D)  internalize risk.

Question 16

An insurance company can use the law of large numbers to predict the number of people in your community that will have a car accident in a given month.

Accepted Answer

A) True 
 B)False

Question 17

Mini-Case
The Bookworm is a bookstore and café located on a busy downtown main street in
Denver. The owner, Waata Reader, prides himself on the vast selection of books available in the store. The store has three stories, with both stairs and an elevator to each level. In the back of the first floor is the café, which serves pastries and coffee drinks. Many times customers will linger there over a cup of coffee, deciding which book to purchase. Waata has expanded several times and now has 22 people on the staff.
-One of Waata's staff members has been out on sick leave because she had an emergency appendectomy. She brought the hospital bills in to Waata for his opinion. It seems she had been covered by two health insurance policies for some time and now she thinks she may be able to collect from both companies in payment for the operation. Waata assured his employee that:

Accepted Answer

A)  she could look forward to a check from both companies once they had paid the medical bills. 
B)  because of the rule of indemnity she would not be able to profit from her operation. 
C)  because of the law of large numbers both insurance companies would pay her directly. 
D)  because her risk was insurable, she would be able to collect from both insurance policies. 
A)  she could look forward to a check from both companies once they had paid the medical bills. 
B)  because of the rule of indemnity she would not be able to profit from her operation. 
C)  because of the law of large numbers both insurance companies would pay her directly. 
D)  because her risk was insurable, she would be able to collect from both insurance policies.

Question 18

Risky Business Insurance Company insures business clients against unexpected disasters such as tornadoes and floods. The company operates in several regions in the U.S., and negotiates contracts following standard insurance industry guidelines. A strategic business guideline that the company would follow is:

Accepted Answer

A)  The amount of loss should be equal to or less than a loss covered by a competitor company. 
B)  There should be documentation that clearly attests to the fact that the loss of buildings, equipment, and even lives is not measurable. 
C)  The company's clients should be dispersed among several geographic areas so that the lack of natural disasters in some areas will compensate for more natural disasters in other areas. 
D)  All insurance companies that sell similar insurance would equally divide the number of claims, so as not to compete unfairly against each other. 
A)  The amount of loss should be equal to or less than a loss covered by a competitor company. 
B)  There should be documentation that clearly attests to the fact that the loss of buildings, equipment, and even lives is not measurable. 
C)  The company's clients should be dispersed among several geographic areas so that the lack of natural disasters in some areas will compensate for more natural disasters in other areas. 
D)  All insurance companies that sell similar insurance would equally divide the number of claims, so as not to compete unfairly against each other.

Question 19

A ________ insurance company is owned by stockholders, just like any other investor-owned company. A ________ insurance company is owned by its policyholders.

Accepted Answer

A)  stock; mutual 
B)  corporate; stock 
C)  stock; corporate 
D)  mutual; limited liability 
A)  stock; mutual 
B)  corporate; stock 
C)  stock; corporate 
D)  mutual; limited liability

Question 20

Firestone and Ford recalled thousands of tires when several people died in traffic accidents blamed on faulty tires. This is an example of which of the following?

Accepted Answer

A)  Avoiding the risk 
B)  Self-insuring against the risk 
C)  Reducing the risk 
D)  A loss-prevention program 
A)  Avoiding the risk 
B)  Self-insuring against the risk 
C)  Reducing the risk 
D)  A loss-prevention program

Exam 24: Extension: Managing Risk

Risks such as global warming are the concern of businesses and governments primarily in the U.S.

________ insurance guarantees payment of wages, medical care, and rehabilitation services for employees who are injured on the job.

Demetrius was turned down when he attempted to buy a life insurance policy on his former Introduction to Business instructor. The most likely reason the insurance company turned down his attempt to insure the life of his former instructor was that:

Outsourcing helps some companies avoid risk.

The premium charged for workers' compensation insurance is the same for all workers, regardless of their occupation.

All-Star 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 a risk management strategy.

Some businesses will set aside money to cover routine losses and buy "catastrophe" policies to cover big losses. This is an example of which of the following?

The Pension Benefit Guaranty Corporation provides retirement benefits, life insurance, health insurance, and disability income insurance.

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

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

An insurance policy is a written contract.

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

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

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

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

An insurance company can use the law of large numbers to predict the number of people in your community that will have a car accident in a given month.

A ________ insurance company is owned by stockholders, just like any other investor-owned company. A ________ insurance company is owned by its policyholders.

Firestone and Ford recalled thousands of tires when several people died in traffic accidents blamed on faulty tires. This is an example of which of the following?

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 Union and 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

Managing the Marketing Mix: Product, Price, Place and Promotion

Extension: Working Within the Legal Environment

Extension: Using Technology to Manage Information

Extension: Managing Personal Finances

Filters

A insurance company is owned by stockholders, just like any other investor-owned company. A insurance company is owned by its policyholders.