Idiosyncratic risk is the ?
Correct answer: B. uncertainty associated with specific companies
- A. uncertainty associated with the entire economy
- B. uncertainty associated with specific companies
- C. risk associated with adverse selection
- D. risk associated with moral hazard
Explanation
Idiosyncratic risk is firm-specific risk, such as a product failure or management problem affecting one company. It can usually be reduced through diversification, unlike economy-wide systematic risk.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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