Choice "A" is correct. The risk of labor strikes can be mitigated by diversification. Diversifiable risk, sometimes called unsystematic or firm specific risk can be mitigated by allocation of a portfolio of investments amongst various firms. Splitting a portfolio between investments in finance companies, which are less prone to strikes, vs. auto manufacturers, which have a higher percentage of organized labor, is an example of diversification to mitigate the risk of strikes.
Choice "c" is incorrect. High interest rates are a risk encountered as a result of participation in the economy and represent a nondiversifable or systematic risk. Everyone is subject to the risk of high interest rates, regardless of industry. Diversification will not mitigate this risk.
Choice "d" is incorrect. Inflation is a risk encountered as a result of participation in the economy and represents a nondiversifable or systematic risk. Everyone is subject to the risk of declining purchasing power, regardless of industry. Diversification will not mitigate this risk.
Choice "b" is incorrect. Recessions are a risk encountered as a result of participation in the economy and represent a nondiversifable or systematic risk. Everyone is subject to the risk of economic downturns, regardless of industry. Diversification will not mitigate this risk.