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.

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Definitions:

Midwest

A region in the United States known for its geographical location in the central part of the country and its agricultural and industrial output.

East Coast

A term typically referring to the eastern seaboard of the United States, known for its significant historical, financial, and cultural centers.

Heuristics

Heuristics are mental shortcuts or simple strategies used to make quick and efficient decisions or solve problems, often employed when facing complex issues or incomplete information.

Availability Heuristic

A strategy for judging how frequently something happens—or how common it is—based on how easily examples of it come to mind.