Which of the following measures are used by a risk‐averse person to minimize risk? A. Diversification…
Diversification spreads nonperfectly correlated risks; Insurance transfers/pools loss exposure; information helps improve risky decisions. Total cost of resources alone is…
Choose your answer
Which of the following measures are used by a risk‐averse person to minimize risk?
A. Diversification of resources
B. Insurance of risk event
C. Total cost of resources
D. Value of information of risk event
A. Diversification of resources
B. Insurance of risk event
C. Total cost of resources
D. Value of information of risk event
Answer and explanation
Correct answer B
Diversification spreads nonperfectly correlated risks; Insurance transfers/pools loss exposure; information helps improve risky decisions. Total cost of resources alone is an accounting magnitude, not a risk-reduction mechanism. A, B and D only is correct; all other sets include C and/or omit a genuine approach.
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UGC NET Economics