Final answer:
Risks vary in cost and likelihood, such as the risk of speeding which carries potential fines and accident risk. The cost/benefit model informs decisions like weighing the benefits of crime against their costs. Asymmetric risk pertains to planning for low-probability but high-impact events, emphasizing risk mitigation strategies.
Step-by-step explanation:
Examples of risks that are either costly, likely, or both are found in various aspects of daily life and can include economic, health, and social factors. Speeding in a vehicle may provide the benefit of reaching a destination faster but carries the cost of potential fines, increased accident risk, and harm to others, which often outweighs the fleeting benefit of saved time. In the world of economics, a cost/benefit model is employed to assess whether the potential rewards of a given action, such as a business investment, are worth the risks and costs associated with that investment. A decision making process that analyses the marginal costs and marginal benefits can be very useful. For example, in crime, the decision to engage in illegal activities is measured against the opportunity costs of legal activities. If the benefits of crime appear to outweigh the costs, such as a high monetary gain with a perceived low risk of getting caught, an individual might opt to commit the crime. However, increased opportunity costs, like better employment options, can help deter criminal behavior.
In the context of asymmetric risk, it is vital to plan for low-probability but high-impact risks, such as natural disasters or other catastrophic events. Risk mitigation strategies, such as purchasing insurance or implementing safety protocols, despite their costs, serve to protect against potentially devastating outcomes. The concept of asymmetric risk highlights the disproportional consequences of failing to mitigate against a threat compared to the relatively minor costs of unnecessary precautions if the threat does not materialize.