All of the following are examples of pure risk EXCEPT?
A. Losing money at a casino
B. Injured while playing football
C. Falling at a casino and breaking a hip
D. Jewelry stolen during a home robbery
The Correct Answer and Explanation is :
The correct answer is A. Losing money at a casino.
Explanation:
Pure risk refers to a situation where there is a possibility of loss or no loss, but no chance of gain. It is a risk that can only result in a negative outcome. The primary examples of pure risk are events that could cause harm to individuals or damage to property, without any potential for positive financial outcomes.
A. Losing money at a casino represents speculative risk rather than pure risk. In gambling, there is the possibility of winning money, which introduces an element of potential gain. Therefore, while losing money is a negative outcome, the existence of a chance to win means this scenario does not fall under pure risk.
B. Injured while playing football and C. Falling at a casino and breaking a hip are both instances where the outcome can only be negative. In these cases, the risk involves potential injuries that do not offer any chance of positive results. These scenarios fit the definition of pure risk, as they involve potential loss of health and safety without any corresponding benefit.
D. Jewelry stolen during a home robbery also illustrates pure risk because it involves the loss of property without any possibility of gain. The risk of theft can only result in the loss of valuables, making it a pure risk scenario.
In summary, while pure risks involve potential losses without a chance of gain, speculative risks (like gambling) include opportunities for both losses and gains. Thus, losing money at a casino is an example of speculative risk, distinguishing it from the pure risks illustrated in options B, C, and D.