1. Foundations

Security Economics — Quiz

Test your understanding of security economics with 5 practice questions.

Practice Questions

Question 1

Under the Gordon–Loeb model, what is the maximum fraction of expected loss that should be invested in cybersecurity to maximize economic efficiency?

Question 2

Which characteristic of certain security controls leads to underinvestment because individual firms may benefit without directly paying, resulting in free-riding?

Question 3

A firm estimates a Single Loss Expectancy (SLE) of \$80,000 for a breach and observes it occurs twice every ten years. What is the Annualized Loss Expectancy (ALE)?

Question 4

A security control costs \12,000 per year and reduces the ALE from \$50,000 to \$30,000. What is the return on investment (ROI) for this control?

Question 5

Which policy instrument addresses information asymmetry in cybersecurity markets by requiring vendors to meet and demonstrate standard security practices?