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Question

Difficulty: MediumFunctions and Importance of Commerce

A cocoa farming cooperative in Idanre harvests large quantities of cocoa beans intended for international buyers. To safeguard the business against unexpected financial losses resulting from marine hazards during sea transit, which major function of commerce directly eliminates this risk hindrance?

  1. Insurance services that pool risks and indemnify against commercial losses during transitAnswer
  2. B
    Retail trade activities focused on selling small quantities directly to final consumers
  3. C
    Direct personal services provided by farm labor consultants for individual satisfaction
  4. D
    Direct production activities designed strictly for immediate self-consumption

Answer

Insurance services that pool risks and indemnify against commercial losses during transit
The correct answer highlights insurance services, an auxiliary to trade that directly removes the hindrance of risk by offering financial indemnity against loss or damage during goods transit.

Step-by-Step Solution

1
Identify the primary commercial challenge presented in the scenario.
The cooperative faces financial exposure to potential damage or loss of goods during international sea transport (marine transit risk).
Commercial activities aim to eliminate specific market hindrances to ensure smooth distribution.
2
Determine which commercial auxiliary eliminates the hindrance of risk.
Insurance acts as an auxiliary to trade by spreading risk and providing financial compensation (indemnity) in the event of loss.
Without insurance, risk prevents traders from engaging in large-scale domestic and foreign trade.

Key Concept

Functions of Auxiliaries to Trade in Eliminating Hindrances to Commerce
Estimated Time:1m 0s
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Topics

Functions and Importance of Commerce

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