The Size of a Firm

question 12

Multiple Choice

The size of a firm:

• A) has no impact on the ability to retain risk
• B) is proportional to the amount of risk it is willing to take
• C) determines whether a firm can hedge its risk
• D) has an impact on its ability to absorb losses

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Definitions:

Opportunity Costs

The cost of forgoing the next best alternative when making a decision or choosing between options.

Diminishing Marginal Utility

The principle that as a consumer consumes more of a good or service, the additional satisfaction gained from each additional unit decreases.

Command Systems

Economic systems where the government or a central authority makes all decisions about what goods and services are produced, how they are produced, and who gets them.

Pure Capitalism

An economic system characterized by private property rights and the market allocating resources with little government intervention.