Which of These Does Not Describe the Differential Information Hypothesis

question 34

Multiple Choice

Which of these does not describe the differential information hypothesis?

• A)Amount of information available from sources other than accounting reports is an increasing function of firm size
• B)The larger the firm,the more information is contained in profits
• C)The differential information hypothesis is developed from the theory of transaction costs and different incentives for information search
• D)Incentive to undertake research for mispricing is greater for larger firms,given the costs of information search are fixed and constant across firms

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Definitions:

Long-Term Costs

Expenses or implications that occur over an extended period, often considered when making decisions that have lasting impacts.

Predicted Benefits

Expected advantages or improvements that result from a particular action or policy.

System-1

Fast, automatic, intuitive approach of processing information, often contrasted with the slower, more deliberate reasoning of System 2.

System-2

A term used in psychology referring to the analytical and conscious mode of thinking, characterized by slower, more deliberate, and logical reasoning.