The risks of doing business are most likely to be the highest in a country that:

• A. offers stable political institutions and transparent regulations
• B. has weak enforcement of property rights and frequent government intervention
• C. encourages competition and innovation through effective policy
• D. provides strong legal protection for contracts and property

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of business risks in microeconomics, which often arise from uncertainty in the economic environment, including political, legal, and regulatory factors.
2. Step 2: Recognize that stable political institutions and transparent regulations typically reduce business risks by providing predictability and fairness in the market.
3. Step 3: Identify that weak enforcement of property rights and frequent government intervention increase uncertainty and risk because businesses cannot reliably protect their assets or anticipate government actions.
4. Step 4: Note that encouraging competition and innovation through effective policy generally lowers risks by fostering a dynamic and fair market environment.
5. Step 5: Understand that strong legal protection for contracts and property rights reduces risks by ensuring that agreements are enforceable and assets are secure, thus making the business environment more stable.