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Question:

Since the ladder was rusty and _________, lending itself to an accident, everyone urged Danny to resist his natural _________ that encouraged him to recklessly climb that ladder anyway.

A precarious...audacity
Explaination

If the ladder is rusty and can lead to an accident, it probably is not safe. Rather it is a safety hazard and could be precarious, dangerous and vulnerable. Yet Danny is naturally a bold and adventurous boy because he is ready to climb the ladder anyway. Therefore, he must resist his own audacity, or boldness, not his courage or cowardice. “Audacity” is the best fit here.