Risk pooling occurs when:
A)people organize themselves into a group to collectively absorb the cost of the risk faced by each individual.
B)people organize themselves into groups according to how risk-averse they are.
C)people organize themselves into groups according to recognizable characteristics.
D)companies organize individuals into groups according to how risk-averse they are.

Question

Quizplus · Accepted Answer

Risk pooling refers to the practice where a group of individuals or entities come together to share and manage risks. By pooling resources, the group collectively absorbs the cost of the risk faced by each member, thereby reducing the financial impact on any single member. This is commonly seen in insurance schemes where premiums collected from a large group cover the claims of those who suffer losses.

Risk Pooling Occurs When