How can specializing in lending help to reduce the adverse selection problem in lending?
What will be an ideal response?
Reducing the adverse selection problem requires the banks to acquire information to screen bad credit risks from good credit risks. It is easier for banks to obtain information about local businesses. Also if the bank lends to firms in a few specific industries they will become more knowledgeable about those industries and a better judge of creditworthiness in those industries.
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Efficiency occurs in a market when
A) the sum of consumer surplus and producer surplus is maximized. B) consumer surplus is equal to producer surplus. C) consumer surplus is less than producer surplus. D) consumer surplus is greater than producer surplus. E) total revenue is maximized.
Refer to the graph below, which shows the effect of ________ on the home economy
A) foreign inflation B) domestic inflation C) foreign deflation D) domestic recession E) foreign recession