(Consider This) Which of the Following Statements About Insurance and Risk

question 243

Multiple Choice

(Consider This) Which of the following statements about insurance and risk is true?

• A) Insurance inhibits economic growth and investment by discouraging risk-taking.
• B) Insurance transfers risk from those with a high tolerance for risk to those with a low tolerance for risk.
• C) Insurance companies always earn profits because insurance premiums always exceed the payout for insured events.
• D) Insurance transfers risk from those with a low tolerance for risk to those with a higher tolerance for risk.

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Definitions:

Standard Hours Allowed

The number of labor hours that should have been worked according to budgeted productivity levels for the actual level of production achieved.

Labor Rate Variance

The difference between the actual hourly wage paid to workers and the standard or expected wage rate.

Standard Labor Rate

The predetermined hourly wage rate used in cost accounting to calculate labor costs.

Standard Hours Allowed

The number of hours that should have been worked for the actual production achieved, based on pre-established standards.