Ch 2

Question 1

Organizational Structure

Answer 1

A framework defining authority and responsibility, ensuring clear task delegation for achieving objectives.

Question 2

Line Organization

Answer 2

Vertical authority flow from the top to bottom, with one superior per employee

Question 3

Line Organization Advantages

Answer 3

Simple authority, fast decisions.

Question 4

Line Organization Disadvantages

Answer 4

Required experienced manager, limited innovation.

Question 5

Functional Organization

Answer 5

Activities grouped by function (eg marketing, finance)

Question 6

Functional Organization Advantages

Answer 6

Expert advice from specialized staff.

Question 7

Functional Organization Disadvantages

Answer 7

Multiple managers, conflicting instructions, slow decisions.

Question 8

Line and Staff Organization

Answer 8

Combining line functions (sales, service) and staff functions (support roles).

Question 9

Line and Staff Advantages

Answer 9

Quick decisions with expert support, improved communication.

Question 10

Line and Staff Disadvantages

Answer 10

Potential conflicts and extra costs.

Question 11

Formalization

Answer 11

Directing activities towards objectives, influenced by complexity of goals.

Question 12

Authority and Responsibility

Answer 12

Clear definitions crucial to avoid frustration, ensuring effective job performance.

Question 13

Job Descriptions

Answer 13

Outlining titles, responsibilities, and performance expectations; prevents role ambiguity.

Question 14

Sole Proprietorship

Answer 14

Business owned by one person, with all personal liability.

Question 15

Partnership

Answer 15

Business owned by multiple people, liability varies.

Question 16

Corporation

Answer 16

Distinct legal entity offering limited liability and potential tax advantage.

Question 17

Operating Affiliations

Answer 17

Collaborative forms, not legal structures, for reaching marketing/sales goals.

Question 18

Express Authority

Answer 18

Clearly defined powers in agency contracts; verbal or written.

Question 19

Implied Authority

Answer 19

Powers inferred from precedent, even if not documented.

Question 20

Apparent Authority

Answer 20

Authority a third party believes exists based on insurer actions.

Question 21

Insurance Brokerage Structure

Answer 21

The legal and operating form that defines and insurance brokerage.