A market system tends to restrict business risk to owners and investors. This results in which of the following beneﬁts?
A) It encourages more people to become entrepreneurs.
B) Firms have to pay more to attract inputs, as these inputs have to share the risk.
C) Firms focus attention on prudent risk management, as it is proﬁtable to manage risk.
D) Income becomes more equally distributed.

Question

Quizplus · Accepted Answer

In a market system, the risk of the business is usually borne by its owners and investors. This encourages firms to focus on prudent risk management to avoid losses, which in turn leads to better opportunities for profit. When firms manage risk effectively, they are able to attract more investment, grow and expand, and provide goods and services to society. Therefore, Choice C is the best answer. Choices A, B, and D are not accurate, as they do not describe the benefits of the market system's risk management.

A Market System Tends to Restrict Business Risk to Owners