1. When you bought your business, a complicated custom-made packing machine was included in the sale. You believe that if the packing machine were destroyed that it would cost you $125,000 to replace. You are looking to change your property insurance and the new insurance agent is relying on you to provide a value for the packing machine. You are considering two options. One is to purchase a policy that insures your machinery for $50,000. You figure this will lower the premium and it will save money on your insurance bills. Frankly, you doubt the machine will fail anytime soon. The other option you are considering is insuring your machinery for $200,000. You figure if you get this policy, you will pay more for the insurance, but if your machinery is destroyed, you will not only get back enough money to purchase new machinery, but a $75,000 bonus to boot. For both of these options, what kind of payment do you think you would receive if your machinery is destroyed and the actual value of your machinery is established?
2. Suppose you run into a friend who has a new idea for a business or product every time you see him. This time, he is convinced he has invented a cutting-edge new management system called "Beverage-Based Management," whereby employees improve their performance by drinking high-caffeine energy drinks with a shot of vodka during their lunch breaks. Your friend provides a pile of research studies showing that caffeine can increase alertness and productivity, while alcohol can reduce inhibitions and increase communication between employees. You are a bit skeptical of his idea, but think some companies might buy his system (at least for comedy purposes). Your friend wants to get a patent on "Beverage-Based Management." Based on your reading in this module, do you think his idea could be patented? Explain why or why not. If you do not think a patent is possible, discuss if there would be another way to protect his "Beverage-Based Management" idea.