Because Information Is Scarce

question 81

Multiple Choice

Because information is scarce,

• A) equity contracts are used 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, can help reduce moral hazard.
• D) all of the above are true.
• E) only B and C of the above are true.

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Definitions:

Layoff Cost

Expenses associated with terminating employees, which may include severance pay, benefits continuation, and other related costs.

Hiring And Training Cost

Expenses associated with recruiting new employees and providing them with the necessary training to perform their job duties.

Labor Hours

The total number of hours worked by employees for the production of goods or the provision of services.

Inventory Holding Cost

The total cost of storing and managing goods that a company has in stock, including warehousing and insurance.