Practice question · Multiple choice
Knight separated risk from uncertainty. Why does that distinction explain where entrepreneurial profit comes from?
Hints
- Ask what an insurer can and cannot write a policy against.
- If a hazard can be priced, who ends up capturing the return for bearing it?
Show the answer
C. Because risk can be priced and insured away, and uncertainty cannot
Why
Anything insurable becomes a cost line, not a profit source. What is left, genuine uncertainty about whether the thing will work at all, is what the entrepreneur is paid for.
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