Large Firms That Can Take on a Number of Small

question 21

Multiple Choice

Large firms that can take on a number of small investment projects whose returns are independent of each other would most likely be characterized as:

• A)risk-averse, because large firms do not like to take any risk.
• B)risk-neutral, because each investment project is small relative to the total and firms are incentivized to maximize profits.
• C)risk-loving, because there are a lot of benefits to being the biggest and most powerful firm.
• D)risk-gaining, because there are a lot of benefits to being the biggest and most powerful firm.

---

Definitions:

Evolutionary Theory

A scientific explanation for the diversity of life, proposing that species change over time through natural selection and genetic variation.

Associative Learning

A learning process by which a connection or association is made between two stimuli or between a behavior and a stimulus.

Psychologist

A professional specializing in the study of the mind and behavior, often providing therapy and counseling services.

Classical Conditioning

A learning process that occurs when two stimuli are repeatedly paired: a response which is at first elicited by the second stimulus is eventually elicited by the first stimulus alone.