Asch Found That a Few Dissenters, Although Incorrect, Were Taken

question 73

Multiple Choice

Asch found that a few dissenters, although incorrect, were taken seriously by a correct majority. This can be viewed as a precursor to later studies on:

• A) minority influence.
• B) group conflict.
• C) reference groups.
• D) obedience to authority.

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Definitions:

Financial Leverage

Use of borrowed funds to increase the potential return of an investment, also indicating how much a company relies on debt to finance its assets.

Static Theory of Capital Structure

A financial hypothesis that suggests there is an optimal capital structure for a company where the cost of capital is minimized, and the value of the firm is maximized.

M&M Proposition I

A theorem stating that in a perfect market, the market value of a company is unaffected by how that company is financed, regardless of whether through debt or equity.

Debt

An amount of money borrowed by one party from another, to be repaid with interest.