When risks are shared across many different assets or people, reducing the impact of any particular risk on any one individual, it is called:
A. diversification.
B. risk analysis.
C. risk aversion.
D. risk pooling.
Answer: A
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Suppose a monopolist offers a $20 mail-in rebate on an item with a list price of $100. In order for the rebate to be a perfect hurdle, it must be the case that:
A. buyers use the rebate if and only if their cost of filling out the rebate is less than $20. B. all buyers with a reservation price greater than $80 use the rebate. C. some buyers with a reservation price greater than $80 use the rebate. D. buyers use the rebate if and only if they have a reservation price between $80 and $100.
Suppose you withdraw $500 from your checking account deposit and bury it in a jar in your back yard. If the required reserve ratio is 10 percent, checking account deposits in the banking system as a whole could drop up to a maximum of
A) $0. B) $50. C) $500. D) $5,000.
The interest rate R in an NPV calculation should always
A) be the return that the firm could earn on a similar investment. B) be the riskless interest rate (e.g., U.S. Treasury bills). C) be the rate on corporate bonds. D) be the rate of return available in the stock market. E) be the interest rate at which the firm has to borrow.
The Index of Economic Freedom measures: a. market orientation
b. market concentration. c. price elasticity. d. market power.