Question

Which of the following statements about speculative risks is true?

a. These risks can almost always be insured by private insurance companies.
b. These risks are easier to predict than pure risks.
c. Speculative risks can benefit society even in the event of a loss.
d. These risks only involve the possibility of loss

Answer 1

Speculative risks are risks where there is a potential for both gain and loss. They are not typically insurable by private insurance companies and can benefit society even in the event of a loss.

Step-by-step explanation:

Speculative risks are risks where there is a potential for both gain and loss. In contrast, pure risks are risks where there is only a possibility of loss. Therefore, the statement that speculative risks only involve the possibility of loss is incorrect. Speculative risks can involve the possibility of both gain and loss.

An example of a speculative risk is investing in the stock market. While there is a possibility of earning a profit, there is also the risk of losing money.

Additionally, speculative risks are not typically insurable by private insurance companies because insurance is designed primarily to cover pure risks, where there is no potential for gain.

Speculative risks can benefit society even in the event of a loss because they often drive innovation and economic growth. For example, entrepreneurs taking on speculative risks by starting new businesses can create jobs and contribute to the economy, even if their businesses fail.