Mary is a low-risk applicant for a loan at a bank, while John is a high-risk applicant. If the bank increases the interest rates it charges on loans, _____
a. John is likely to leave the market for loans
b. the problem of moral hazard will prevent John from getting a loan
c. the commons problem will prevent Mary from getting a loan
d. Mary is likely to leave the market for loans
e. both Mary and John will leave the market for loans
d
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Which of the following is NOT a financial intermediary?
A) mutual fund B) bank C) stock exchange D) insurance company
When attempting to build a shopping center the size of several city blocks a developer anticipates a holdout problem in his preferred location. Which of the following is not an option the developer has available to get around the holdout problem?
a. Substituting to another location by building the shopping center on former farmland on the urban fringe. b. Lobbying the local government to use eminent domain on potential holdouts. c. Attempting to purchase the properties through dummy corporations to hide his true intent. d. Using contracts that increase everyone's sale price by a small percentage if everyone sells.