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Professor: Economists argue that buying lottery tickets is an unwise u

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Professor: Economists argue that buying lottery tickets is an unwise u  [#permalink]

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New post 10 Mar 2018, 10:03
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Professor: Economists argue that buying lottery tickets is an unwise use of resources, because the average payoff for the tickets sold in a lottery is much lower than the cost of a ticket. But this reasoning is faulty. The average amount paid out on individual insurance policies is much lower than the average cost of a policy, yet nobody would argue that purchasing insurance is an unwise use of resources.

Which one of the following, if true, most weakens the professor's argument?

(A) Individuals spend, on average, much more on insurance than on lottery tickets.
(B) Insurance companies generally retain a higher proportion of total revenue than do organizations that sponsor lotteries.
(C) Taking small financial risks can often greatly increase one's chances of obtaining much larger benefits.
(D) In general, the odds of winning the grand prize in a lottery are significantly lower than the odds of collecting a settlement from a typical insurance policy.
(E) The protection against loss that insurance provides is more important to one's well-being than is the possibility of a windfall gain.

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Re: Professor: Economists argue that buying lottery tickets is an unwise u  [#permalink]

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New post 11 Mar 2018, 06:59
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Akela wrote:
Professor: Economists argue that buying lottery tickets is an unwise use of resources, because the average payoff for the tickets sold in a lottery is much lower than the cost of a ticket. But this reasoning is faulty. The average amount paid out on individual insurance policies is much lower than the average cost of a policy, yet nobody would argue that purchasing insurance is an unwise use of resources.

Which one of the following, if true, most weakens the professor's argument?


(A) Individuals spend, on average, much more on insurance than on lottery tickets.
This choice strengthens the argument

(B) Insurance companies generally retain a higher proportion of total revenue than do organizations that sponsor lotteries.
This choice is irrelevant to the argument

(C) Taking small financial risks can often greatly increase one's chances of obtaining much larger benefits.
This choice seems to strengthen the argument since it supports buying lottery

(D) In general, the odds of winning the grand prize in a lottery are significantly lower than the odds of collecting a settlement from a typical insurance policy.
This choice is irrelevant to the argument. The argument is about buying insurance, not collecting a settlement from a typical insurance policy.

(E) The protection against loss that insurance provides is more important to one's well-being than is the possibility of a windfall gain.
Correct. Two sides both contain risks, but protecting against risk is more important than buying risk.
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Re: Professor: Economists argue that buying lottery tickets is an unwise u &nbs [#permalink] 11 Mar 2018, 06:59
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