Module 2

Question 1

From the reading “Innovation Risk”, mathematical modeling:

Answer 1

Can be set by humans to execute upon specific guidelines

Question 2

According to the Center for Disease Control (accessed 2017), when comparing annual smoking related deaths to auto accidents, smoking deaths are:

Answer 2

10 times greater than auto accident deaths

Question 3

One of the public policy concerns associated with risk reduction in the reading “A Scientific View of Risk” is estimating the cost and benefits of risk reduction. For many risks, such as highway safety estimating the cost and benefits of risk reduction include:

Answer 3

Putting a value on human life

Question 4

According to “Innovation Risk: How to Make Smarter Decisions”, you use models every day. Why is it that you don’t recognize that you’re using a model?

Answer 4

Models that apply to real-life situations are often applied semiconsciously.

Question 5

The reading “A Scientific View of Risk” has a different definition of risk than we have used in class. The definition used in this reading added what component to the definition?

Answer 5

A time element (given period of time)

Question 6

As an application of the “number of days” lost measure of risk discussed in “Scientific View of Risk” consider the following 2015 statistic. Today’s life expectancy is well into the 80s. What percentage of life-long smokers die before the age of 70?

Answer 6

50%

Question 7

One of the core concepts of the reading “A Scientific View of Risk” is:

Answer 7

risk reduction has both monetary and non-monetary costs

Question 8

According to “Innovation Risk: How to Make Smarter Decisions”, which of the following is NOT an observable external factor measured by the Black-Scholes formula?

Answer 8

the Dow Jones Industrial Average

Question 9

According to “Innovation Risk: How to Make Smarter Decisions”, the infrastructure should be changed based on every new innovation.

Answer 9

False

Question 10

According to the reading “A Scientific View of Risk”, innumeracy is:

Answer 10

a lack of intuitive understanding of numbers

Question 11

Think about the following statement. “Innovations to make us feel safer often lead to us changing our habits because we feel safer, thereby increasing risk.” Which of the following is an example of the statement?

Answer 11

Erin just paid ADT to install an alarm system in her house. Now, she can finally stop worrying about locking her doors at night.

Question 12

According to “Innovation Risk: How to Make Smarter Decisions”, the utility of a model depends on the model itself, why it’s being used and which of the following?

Answer 12

Who is using the model

Question 13

According to “Innovation Risk: How to Make Smarter Decisions”, which of the following is NOT one of the five rules of thumb to minimizing risk?

Answer 13

Determine which risks are being faced

Question 14

From the reading “Innovation Risk”, the characteristics of a sound mathematical model include all of the following EXCEPT:

Answer 14

Fewer than three variables

Question 15

According to “Innovation Risk: How to Make Smarter Decisions”, what is one of the major factors in determining the risks and benefits of innovation?

Answer 15

The infrastructure in which the innovation is introduced.

Question 16

According to “Innovation Risk: How to Make Smarter Decisions”, which one of the following was NOT one of the simultaneous factors of the recent financial crisis?

Answer 16

High interest rates
(was due to simultaneous occurrence of low interest rates, an efficient mortgage refinancing market and rising house prices)

Question 17

In the lecture, we applied some of the concepts of the article “Innovation Risk” to self-drive cars. Which of the following was NOT one of the rewards discussed with self-drive cars?

Answer 17

Increased driver error

Question 18

Greg and Emily were tasked with developing a model of how an individual may purchase lottery tickets. Greg’s model for determining ticket purchases incorrectly assumes all people are equally likely to play the lottery. Emily’s model correctly assumed that lottery ticket purchases vary with income and education levels and found very different results than Greg’s model. Which of the following describes Greg’s model?

Answer 18

Incorrect

a model whose internal logic or underlying assumptions are wrong.