DEALING WITH RISK AND UNCERTAINTY FINAL
PAPER 2026 QUESTIONS WITH ANSWERS
GRADED A+
◉ What does the Latin term 'riscum' refer to? Answer: It refers to a
challenge, typically associated with an unfavorable event.
◉ What is the primary focus of risk management? Answer: To
analyze and mitigate potential negative outcomes associated with
uncertain events.
◉ How does economic theory relate to risk and uncertainty?
Answer: It evolved from statistical and mathematical subjects and is
used to make decisions under risk.
◉ What is the expected utility theory (EUT)? Answer: A model of
rational choice for making risky decisions, foundational to
probability laws.
◉ How does Knight (1921) define uncertainty? Answer: As
'uninsurable hazards' where the probability cannot be specified.
, ◉ What is the difference between risk and uncertainty according to
Keynes (1921)? Answer: Risk involves known probabilities, while
uncertainty arises when probabilities cannot be calculated.
◉ Who is considered the 'father' of economics? Answer: Ibn
Khaldun, who laid the foundations for various fields of knowledge
including economics.
◉ What is the significance of Adam Smith in economic thought?
Answer: His works were published 370 years after Ibn Khaldun's
death, marking a significant development in economics.
◉ What is the St. Petersburg Paradox? Answer: A concept
introduced by Daniel Bernoulli that illustrates decision-making
under risk.
◉ What does the term 'risk aversion' refer to? Answer: The tendency
to prefer certainty over a gamble with a higher expected payoff.
◉ Who proposed the State Preference Theory? Answer: Kenneth
Arrow and Gerard Debreu.
◉ What role does Bernoulli's concept of expected utility play in
economic theory? Answer: It serves as the foundation for making
choices under risk.
PAPER 2026 QUESTIONS WITH ANSWERS
GRADED A+
◉ What does the Latin term 'riscum' refer to? Answer: It refers to a
challenge, typically associated with an unfavorable event.
◉ What is the primary focus of risk management? Answer: To
analyze and mitigate potential negative outcomes associated with
uncertain events.
◉ How does economic theory relate to risk and uncertainty?
Answer: It evolved from statistical and mathematical subjects and is
used to make decisions under risk.
◉ What is the expected utility theory (EUT)? Answer: A model of
rational choice for making risky decisions, foundational to
probability laws.
◉ How does Knight (1921) define uncertainty? Answer: As
'uninsurable hazards' where the probability cannot be specified.
, ◉ What is the difference between risk and uncertainty according to
Keynes (1921)? Answer: Risk involves known probabilities, while
uncertainty arises when probabilities cannot be calculated.
◉ Who is considered the 'father' of economics? Answer: Ibn
Khaldun, who laid the foundations for various fields of knowledge
including economics.
◉ What is the significance of Adam Smith in economic thought?
Answer: His works were published 370 years after Ibn Khaldun's
death, marking a significant development in economics.
◉ What is the St. Petersburg Paradox? Answer: A concept
introduced by Daniel Bernoulli that illustrates decision-making
under risk.
◉ What does the term 'risk aversion' refer to? Answer: The tendency
to prefer certainty over a gamble with a higher expected payoff.
◉ Who proposed the State Preference Theory? Answer: Kenneth
Arrow and Gerard Debreu.
◉ What role does Bernoulli's concept of expected utility play in
economic theory? Answer: It serves as the foundation for making
choices under risk.
