The Primary Difference Between Entering into a Gamble and Purchasing

question 84

Multiple Choice

The primary difference between entering into a gamble and purchasing insurance is that

• A)in a gamble the odds are known with certainty.
• B)with all types of insurance you are always financially better off,whereas,with gambles,you are always financially worse off.
• C)a gamble involves pure risk,whereas insurance involves speculative risk.
• D)gambling is in many circumstances illegal and insurance is legal.

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Definitions:

Zero-Profit Equilibrium

A situation in competitive markets wherein, due to free entry and exit, firms only earn a normal profit, which is their lowest level of profit necessary to keep them in business.

Industry Expands

The process of a sector growing in size through increased production, possibly due to higher demand or technological advancements.

AVC

Average Variable Cost, which is the variable cost per unit of output, calculated by dividing total variable costs by the quantity of output.

ATC

Average Total Costs, which is the sum of all production costs (fixed and variable) divided by the quantity of output produced, detailing the average cost per unit of output.