An Individual Can Almost Eliminate Risk by Taking a Small

question 31

Multiple Choice

An individual can almost eliminate risk by taking a small share in many independent events or by taking advantage of the predictability associated with large numbers of independent events. This is known as:

• A) specializing.
• B) floating.
• C) pooling.
• D) insuring.

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Definitions:

Solver

An optimization tool in spreadsheet programs that finds the optimal solution to a problem by changing multiple variables within constraints.

Optimal Number

The most favorable, efficient, or effective quantity determined through analysis or calculation for a specific criterion.

Monthly Profit

The net income earned by a business over the course of a month after all expenses have been subtracted from total revenue.

Unbounded Problem

A scenario in optimization where the solution can infinitely improve, meaning there are no constraints limiting the value of the objective function.