A Key Finding of the Economic Analysis of Financial Structure

question 34

Multiple Choice

A key finding of the economic analysis of financial structure is that

• A)the existence of the free-rider problem for traded securities helps to explain why banks play a predominant role in financing the activities of businesses.
• B)while free-rider problems limit the extent to which securities markets finance some business activities,nevertheless the majority of funds going to businesses are channeled through securities markets.
• C)given the great extent to which securities markets are regulated,free-rider problems are not of significant economic consequence in these markets.
• D)economists do not have a very good explanation for why securities markets are so heavily regulated.

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Definitions:

Operant Conditioning

A method of learning where behavior modification is achieved by either reinforcing or punishing actions.

Backward Conditioning

A learning process where a conditioned stimulus (CS) is presented after the unconditioned stimulus (US), typically resulting in weaker learning compared to forward conditioning.

Extinction

The process by which a learned behavior diminishes or disappears as a result of the repeated absence of an unconditioned stimulus or reinforcement.

Reward Centers

Brain structures that regulate the experience of pleasure and motivate individuals towards behaviors necessary for survival, such as eating and reproduction.