Select the answer that best completes the following statement. ________________ is a measure that reduces the frequency of a loss, while ________________ is a measure that reduces the severity of a loss.

• A. Risk control, risk financing
• B. Loss prevention, loss reduction
• C. Loss reduction, risk control
• D. Loss reduction, loss prevention

Natalie opened a successful restaurant. One night, after the restaurant closed, a fire started when the electrical system malfunctioned. In addition to the physical damage to the restaurant, Natalie lost profits that could have been earned while the restaurant was closed for repairs. The lost profits are an example of a(n)

• A. Direct loss
• B. Fundamental risk
• C. Speculative risk
• D. Indirect loss

Which of the following is a benefit of insurance to society?

• A. Fraudulent claims
• B. Reduction of worry and fear
• C. Loss prevention
• D. Both B and C are benefits of insurance to society.

MLX Drug Company would like to market a new hypertension drug. While the FDA was testing the drug, it discovered that the drug produced a harmful side effect. When MLX learned of the FDAs test result, MLX abandoned its plan to produce and distribute the drug. MLXs reaction illustrates which of the following?

• A. Risk avoidance
• B. Hedging
• C. Risk transfer
• D. Risk retention

Which of the following correctly reflects the order of post-loss objectives (from most important to least important)?

• A. Survival of the firm, continuation of operations, stability of earnings, continued growth, social responsibility
• B. Social responsibility, continued growth, continuation of operations, stability of earnings, survival of the firm
• C. Survival of the firm, continued growth, continuation of operations, stability of earnings, survival of the firm
• D. Continuation of operations, continued growth, survival, stability of earnings, social responsibility