Which of the Following Benefits of Diversification Explains the Idea

question 33

Multiple Choice

Which of the following benefits of diversification explains the idea that a firm with many business lines can reduce swings in value because it receives only a small percentage of its revenue from any one of those business lines?

• A)Use of internal capital markets
• B)Economies of scale and scope
• C)Economizing on transaction costs
• D)Diversifying shareholder portfolios
• E)Identifying undervalued firms

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Definitions:

Sympathy

Feelings of pity or sorrow for someone else's misfortune, often leading to supportive or compassionate actions.

Belief in a Just World

The cognitive bias that assumes people get what they deserve, leading to a rationale for misfortune and suffering.

Empathy-Altruism Model

The idea that the reason people help others depends on how much they empathize with them. When empathy is low, people help others when benefits outweigh costs; when empathy is high, people help others even at costs to themselves.

Empathy Gap

The difficulty in understanding or predicting the preferences, behaviors, or feelings of those who are in a different emotional or physical state.