Chapter Questions
Define risk. In your definition, state the relationship between risk and uncertainty
Risk may be classified in several ways. List the principal ways in which risk may be categorized, and explain the distinguishing characteristics of each class.
The distinction between "pure risk" and "speculative risk" is important because only pure risks are normally insurable. Why is the distinction between "fundamental risk" and "particular risk" important?
Explain how pure risk has an adverse effect on economic activity.
List the four types of pure risk facing an individual or an organization and give an example of each.
The text discusses the "burden of risk." What are the two principal ways in which the impact of risk may be felt by an individual or an organization?
Distinguish between "perils" and "hazards" and give two specific examples of each.
Briefly distinguish among the three categories into which hazards may be divided and give an example of each.
Explain why the number of risks and the severity of losses increase over time.
With respect to each of the following, indicate whether you would classify the event or condition as a peril or a hazard: an earthquake, sickness, worry, a careless act, and an economic depression.