Passage Summary: Melinda says insurance is a good way to manage risk by sharing the burden with others. Jack disagrees, thinking she means insurance somehow prevents fires from happening in the first place.

Reasoning: Melinda argues insurance reduces risk through distribution, while Jack argues it doesn't reduce the physical probability of a disaster.

Analysis: Jack is confusing two different meanings of the word 'risk.' Melinda is using it in a financial sense—the risk of total financial loss—while Jack interprets it as the physical probability of a hazardous event occurring. To find the right answer, look for the term that describes the danger or the likelihood of loss, as Jack's disagreement is based on a literal rather than economic interpretation.