Because Information Is Scarce

question 71

Multiple Choice

Because information is scarce

• A)helps explain why equity contracts are used so much more frequently to raise capital than are debt contracts.
• B)monitoring managers gives rise to costly state verification.
• C)government regulations,such as standard accounting principles,have no impact on problems such as moral hazard.
• D)developing nations do not rely heavily on banks for business financing.

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Definitions:

Expectancy Theory

A motivational theory suggesting that individuals are motivated to act in certain ways based on their expectations of outcomes and the attractiveness of those outcomes.

Interval Schedules

Are partial reinforcement schedules in which behavior is reinforced as a function of the passage of time—for example, rewarding someone every 10 minutes as long as they were exhibiting desired behavior.

Ratio Schedules

In the context of behavioral psychology, it's a reinforcement strategy where a response is reinforced after a specific number of responses.

Reinforcement Theory

A behavioral theory which posits that behavior can be shaped or modified through rewards or punishments, encouraging or discouraging certain actions.