The question says, "Which one of the following, if true, most weakens the professor's argument?"
(D) says, "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."
(D) does pick up on the difference between lottery tickets and insurance policies. However, the argument in the stimulus discusses the average return, which takes into consideration the odds of receiving a payout. Because this is already part of the argument, there is no way that it can have an effect on it, so (D) is out.
(E) says, "The protection against loss that insurance provides is more important to one's well-being than is the possibility of a windfall gain."
With (E), insurance policies would provide another benefit in addition to a payout (if something were to go wrong). This doesn't happen with lottery tickets. if (E) is true, this strongly calls into question the professor's counterexample, which weakens his argument, making (E) the correct answer choice.
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