Chapter 9- Risk and uncertainty and opportunity cost

Question 1

What do those running a business need to try to identify?

Answer 1

• all the possible uncertainties and risks that they face

Question 2

What are the two types of risk?

Answer 2

• pure risk
• speculative risk

Question 3

Pure risk

Answer 3

• an event beyond someone’s personal control
• it can only result in a loss of some sort, never in a gain
• e.g. possibility of a fire at a factory
• doesn’t mean nothing can be done about such risks , solution is to ensure that premises and goods are adequately insured and contingency plan constructed for the event