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How is an earnings-at-risk plan different from an ordinary gain-sharing or profit-sharing plan? How might earinings-at-risk plans affect attraction and retention of employees?

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Divya Singh
Divya SinghLv10
28 Sep 2019

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How might payment of an efficiency wage

(a) reduce shirking by employees and (b) reduce employee turnover?

What is the implication of the efficiency wage theory for unemployment? In what way are piece rates, commissions, royalties, profit sharing, and stock options substitutes for efficiency wages?

One of the elements of risk is uncertainty. Which one of the following best describes the type of uncertainty that risk involves?

Uncertainty as to how to manage potential losses

Uncertainty as to whether a negative outcome is possible

Uncertainty as to the type and timing of the outcome

Uncertainty as to whether insurance is available

Risk can be classified as pure or speculative. Which one of the following is the best example of a speculative risk?

Buying a new personal vehicle

Purchasing an insurance policy

Acquiring a new television

Investing in shares of stock

The second step in the risk management process is analyzing loss exposures. Which one of the following is true regarding this step?

Loss exposures are analyzed based on loss frequency, loss severity, total dollar losses, and timing in this step.

Loss exposures that could interfere with the achievement of the organization's goals are identified in this step.

A weakness of loss exposure analysis is that it is useful only for those types of losses that an organization has suffered in the past.

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Which one of the following is a noninsurance risk transfer measure?

A finite risk plan

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A large deductible plan

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Current expensing of losses as a planned retention funding measure would be most appropriate for funding which one of the following?

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Losses that represent a large proportion of the organization's cash flows
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An auto physical damage deductible

3-Litigated liability claims
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A hold harmless agreement is a :

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Risk retention measure.
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Form of liability insurance.
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Noninsurance risk transfer measure.

4- Type of risk pooling mechanism.

Fairyland has two citizens, Cosmo and Pixie. Each has the same utility function, U=ln(C) . Both earn $1000 in their full-time jobs, but both face
some risk of being laid off due to a potential shortage of fairy dust, in which case they will only earn $250 in an alternate part-time job. There is a 10% chance that Cosmo will be laid off and a 30% chance Pixie will be laid off. The Governor of Fairyland, Jorgen von Strangle, is considering providing unemployment insurance. In particular, Jorgen is considering two plans: the first would pay any worker who loses his job $100; the second would pay any worker who loses his job $600. Both plans would be financed by collecting a tax from any worker who keeps his job.
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b. For the tax from part a, compute the well-being of Cosmo and Pixie under each plan.
c. For three possible policies (the two plans and the status quo of no plan), how do Cosmo and Pixie rank the policies, respectively, in terms of their own well-being.

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