Which Qualitative Characteristic of Financial Information Alleviates "Moral Hazard

question 17

Multiple Choice

Which qualitative characteristic of financial information alleviates "moral hazard"?

• A)Neutrality.
• B)Predictive value.
• C)Timeliness.
• D)Comparability.

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Definitions:

Long-Run Equilibrium

A state in which all factors of production and markets in an economy are in balance, and all firms in the market are earning normal profits with no inclination to enter or exit the market.

Internal Diseconomies

Increased per unit costs that occur when a firm or industry grows beyond a certain size, leading to inefficiencies.

External Diseconomies

Negative effects experienced by third parties or the general public due to the activities of a business or industry, not reflected in market costs.

Decreasing-Cost Industry

An industry where the cost per unit of output decreases as the scale of production increases is known as a decreasing-cost industry.