A Small Local Bank Failed Because of a Housing Market

question 76

Multiple Choice

A small local bank failed because of a housing market collapse following the departure of the area's largest employer.What type of risk applies to the failure of the institution?

• A)firm-specific risk
• B)technological risk
• C)operational risk
• D)insolvency risk

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Definitions:

Additional Bakers

Implies an increase in the number of bakers in a market or industry, potentially increasing the supply of baked goods.

Local Bakery

A nearby place that specializes in baking and selling bread, pastries, cakes, and other baked goods.

Long-Run Adjustment

Economic processes or actions that firms take over time to adjust to market conditions, including changes in production capacity or entering and exiting markets.

Foreign Competition

The competitive pressure that domestic companies face from products and services offered by foreign entities in the same market.