Which of the Following Actions Does Not Help Reduce Risk

question 78

Multiple Choice

Which of the following actions does not help reduce risk?

• A) Extending the service warranty for your notebook
• B) Converting your money market account to a mutual fund account
• C) Contracting to sell your farm produce to the neighborhood grocery
• D) Buying Japanese yen now when you plan to study in Japan next year

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Definitions:

Government Bailouts

Financial support provided by a government to prevent the bankruptcy of a failing business or sector, aiming to stabilize the economy.

Coase Theorem

a principle that asserts that in the absence of transaction costs, parties can negotiate solutions to externalities among themselves, regardless of the initial allocation of property rights.

Externalities

Economic side effects or consequences of commercial activities that affect other parties without being reflected in the cost of the goods or services involved.

Adverse Selection

A situation in markets where buyers and sellers have different information, leading to transactions where one party may be disadvantaged.