Explain the problem of the nondiversifiability of human capital A. the unique sk

Question

Explain the problem of the nondiversifiability of human capital

A. the unique skills and knowledge an employee must learn in a particular job with a particular firm may have less (or no) value in another job

B. a stockholder’s investment is easily diversified at very little cost, so stockholders care only about non-diversifiable risk

C. employees bear total risk (diversifiable plus non-diversifiable risk), whereas shareholders can easily choose to bear only non-diversifiable risk

D. employees may refuse to undertake a very positive-NPV investment because it has a large amount of diversifiable risk

A and B

A and C

A and D

B and C

B and D

C and D

all but A

all but B

all but C

all but D

all are true

A. the unique skills and knowledge an employee must learn in a particular job with a particular firm may have less (or no) value in another job

B. a stockholder’s investment is easily diversified at very little cost, so stockholders care only about non-diversifiable risk

C. employees bear total risk (diversifiable plus non-diversifiable risk), whereas shareholders can easily choose to bear only non-diversifiable risk

D. employees may refuse to undertake a very positive-NPV investment because it has a large amount of diversifiable risk

A and B

A and C

A and D

B and C

B and D

C and D

all but A

all but B

all but C

all but D

all are true

Explanation / Answer

Explain the problem of the nondiversifiability of human capital

C and D

because the employees actually bear all the risk unlike the stakeholders and therefore employees may refuse to undertake a very positive-NPV investment

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