TASK DEFINITION:  You are given a background paragraph that describes one or more causal or physical relationships, such as a relationship in economics, scientific law, or nature. You need to come up with a fictional story that makes use of the concepts or the relationship described in the provided paragraph. Make sure that your story does not repeat the relation in the given paragraph (e.g., by avoiding verbatim copies of the given paragraph). Start by reading the background paragraph, and determine what relationship(s) are in the paragraph. Write a story that involves the relationship(s) that you determined are in the background paragraph. Try to use your own words as much as possible and not repeat the background paragraph. Feel free to make up places and events as long as they tie back to the background paragraph in a way that you can ask a question about.
PROBLEM: Background Paragraph: The trade-off theory of capital structure is the idea that a company chooses how much debt finance and how much equity finance to use by balancing the costs and benefits. The classical version of the hypothesis goes back to Kraus and Litzenberger[1] who considered a balance between the dead-weight costs of bankruptcy and the tax saving benefits of debt. Often agency costs are also included in the balance. This theory is often set up as a competitor theory to the pecking order theory of capital structure. A review of the literature is provided by Frank and Goyal.[2]

An important purpose of the theory is to explain the fact that corporations usually are financed partly with debt and partly with equity. It states that there is an advantage to financing with debt, the tax benefits of debt and there is a cost of financing with debt, the costs of financial distress including bankruptcy costs of debt and non-bankruptcy costs (e.g. staff leaving, suppliers demanding disadvantageous payment terms, bondholder/stockholder infighting, etc.). The marginal benefit of further increases in debt declines as debt increases, while the marginal cost increases, so that a firm that is optimizing its overall value will focus on this trade-off when choosing how much debt and equity to use for financing.

SOLUTION: Bob is a financial analyst. He used to work for company A. Bob noticed that company A is mostly financed by debt. Recently, he changed job and now working as a financial analyst for another company, company B. Company B has completely different culture than company A. Company B is mostly financed by equity.

PROBLEM: Background Paragraph: Fish reproduce sexually. They lay eggs that can be fertilized either inside or outside of the body. In most fish, the eggs develop outside of the mother's body. In the majority of these species, fertilization also takes place outside the mother's body. The male and female fish release their gametes into the surrounding water, where fertilization occurs. Female fish release very high numbers of eggs to increase the chances of fertilization.

SOLUTION: All marine creatures are not fish. There are some mammals, for example, whales, also live in the water. Rob wants to know more about differences between fish and other non fish creatures in the water. He divided them into two groups, group A and group B. Group A consists of fish, and group B consists of non fish creatures in the water. He started to see the differences between these two groups.

PROBLEM: Background Paragraph: The benefits provided by no-tillage to predators may lead to larger predator populations, which is a good way to control pests (biological control), but also can facilitate predation of the crop itself. In corn crops, for instance, predation by caterpillars can be higher in no-till than in conventional tillage fields.In places with rigorous winter, untilled soil can take longer to warm and dry in spring, which may delay planting to less ideal dates. Another factor to be considered is that organic residue from the prior year's crops lying on the surface of untilled fields can provide a favorable environment to pathogens, helping to increase the risk of transmitting diseases to the future crop. And because no-till farming provides good environment for pathogens, insects and weeds, it can lead farmers to a more intensive use of chemicals for pest control. Other disadvantages of no-till include underground rot, low soil temperatures and high moisture.Based on the balance of these factors, and because each farm has different problems, agroecologists will not attest that only no-till or complete tillage is the right way of farming. Yet, these are not the only possible choices regarding soil preparation, since there are intermediate practices such as strip-till, mulch-till and ridge-till, all of them – just as no-till – categorized as conservation tillage. Agroecologists, then, will evaluate the need of different practices for the contexts in which each farm is inserted.

SOLUTION:
Barb and Jill practiced small scale farming. Jill farmed the conventional way, while barb used the no-tillage method.