TASK DEFINITION: You are given a background paragraph that describes one or more causal or qualitative relationships such as a relationship in economics or a scientific law and a story that makes use of the concepts or the relationship described in the provided paragraph. You are also given a question about the story that requires an understanding of the relationship described in the background paragraph and the story. You need to come up with an answer to the given question; the answer will be a span from either the question or the story. In order to correctly answer the given question, you need to understand the relationship mentioned in the background paragraph and should be able to use it to understand that in the story. Your answer can not consist of any word that is not mentioned in any of these: the background paragraph, the story, or the question. You can directly copy and paste a span from the story or the question while answering the given question.
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. 
Story: Company X stopped taking on more debt, and decided to file for bankruptcy, while company Y, kept benefiting from the tax benefits of debt, having a lower debt level. 
Question: Which company discharged more debt, company X or company Y?

SOLUTION: company X.

PROBLEM: Background Paragraph: Something that is elastic can return to its original shape after being stretched or compressed. This property is called elasticity . As you stretch or compress an elastic material like a bungee cord, it resists the change in shape. It exerts a counter force in the opposite direction. This force is called elastic force . The farther the material is stretched or compressed, the greater the elastic force becomes. As soon as the stretching or compressing force is released, elastic force causes the material to spring back to its original shape. You can watch a demonstration of elastic force at this URL:. 
Story: Andy is playing with a rubber band. He stretches the rubber band out as far as he can without breaking it. 
Question: Will the amount of force required to stretch the rubber band increase or decrease as he stretched it further?

SOLUTION: increase.

PROBLEM: Background Paragraph: Earth is a restless planet. Heat in the Earth’s interior causes giant plates of crust to move around on the surface. The crashing and smashing of these plates leads to nearly all of the geological activity we see. Plate collisions bring us volcanoes and earthquakes, mountain ranges, and many resources. Seafloor forms as plates move apart. Some of Earth’s most beautiful landscapes come from plate tectonics. The Grand Tetons in Wyoming rose up as the Farallon Plate sunk beneath the North American Plate during the Laramide orogeny. 
Story: John was studying the plate tectonics of earth. He specifically selected two locations, location A and location B. He noticed that location A had lot of plate tectonics activities, but location B didn't have much of that. He wondered how that would make difference in those locations' characteristics. 
Question: Which location would have less volcanoes and earthquakes, location A or location B?

SOLUTION:
location B.