A Potential Agency Conflict Can Arise Between Stockholders and Creditors

question 47

Multiple Choice

A potential agency conflict can arise between stockholders and creditors because owners may _____.

• A) increase the risk of a firm's investments
• B) decrease the amount of debt outstanding
• C) decrease the risk of a firm's investments
• D) increase the firm's net worth

---

Definitions:

Biologically Predisposed

Being biologically predisposed means having an increased likelihood of developing certain characteristics, behaviors, or diseases due to genetic factors.

Learned Habits

Behaviors acquired through repetition and reinforcement, becoming automatic responses to specific situations.

Biological Constraints

Biological constraints are limitations on learning that are caused by the biology of the organism, suggesting that some behaviors are inherently more difficult to learn than others due to genetics.

Ivan Pavlov

A Russian physiologist best known for his research in classical conditioning, particularly his experiments with dogs that led to the discovery of the conditioned reflex.