Which of the following is an example of pure risk?

Pure risk refers to risks that present the possibility of loss or no loss, but not gain. It essentially encompasses situations where only negative outcomes can occur, such as accidents, illnesses, or property damage.

Purchasing health insurance exemplifies pure risk because it involves the risk of incurring medical costs due to illness or injury. If no medical issues arise, the individual does not realize a financial gain from the health insurance, but they also do not face a loss beyond the premiums paid. Therefore, this situation is about protecting against potential losses associated with health-related expenses without the possibility of gaining from the risk itself.

In contrast, investing in the stock market involves speculative risk, where there is a chance for both loss and gain. Opening a new business also represents a form of risk related to uncertainty about profitability, thus allowing for the possibility of both loss and gain. Playing the lottery involves a high degree of risk, primarily associated with the potential for loss of the ticket price, but with a significant chance for an unexpected financial gain if the ticket wins.