Why Do Corporations Want to Keep the Price of Their

question 151

Multiple Choice

Why do corporations want to keep the price of their stock high?

• A)A higher stock price increases the funds the firm can raise when it sells a given amount of stock.
• B)Corporations can pay their managers lower salaries and avoid principal-agent problems when stock prices are higher.
• C)Higher stock prices are correlated with lower expected profitability.
• D)All of the above provide incentive for corporations to keep the price of their stock high.

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Definitions:

Latent Learning

Learning that occurs without any obvious conditioning or immediate display of behavior and manifests later when suitable.

Extinction

In psychology, the gradual weakening of a conditioned response that results in the behavior decreasing or disappearing.

Generalization

The ability to apply the lessons learned from specific instances to broader, similar situations without being explicitly taught for every situation.

Positive Reinforcement

A process in behavior analysis where the probability of a behavior occurring is increased by following it with the addition of a reinforcing stimulus.