Which of the following is NOT true of adverse selection?
A) It would not exist in a world of perfect information.
B) It arises because borrowers typically know more than lenders.
C) It describes a lender's problem of distinguishing the good-risk applicants from the bad-risk applicants.
D) It describes a lender's problem in verifying borrowers are using their funds as intended.
D
You might also like to view...
If a stock is expected to pay a dividend of $40 for the current year, what is the approximate present value of this stock, given at discount rate of 5% and a dividend growth rate of 3%?
What will be an ideal response?
Assuming that good "x" is measured on the x-axis and good "y" is measured on the y-axis, if the utility for the two goods "x" and "y" can be measured as U = y, then it can be concluded that
A) "x" and "y" are perfect complements. B) "x" is a "bad". C) the indifference curves on the x,y graph are upward sloping. D) the indifference curves on the x,y graph are horizontal.