Analysis of adverse selection indicates that financial intermediaries, especially banks
A) have advantages in overcoming the free-rider problem, helping to explain why indirect finance is a more important source of business finance than is direct finance.
B) despite their success in overcoming free-rider problems, nevertheless play a minor role in moving funds to corporations.
C) provide better-known and larger corporations a higher percentage of their external funds than they do to newer and smaller corporations which rely to a greater extent on the new issues market for funds.
D) must buy securities from corporations to diversify the risk that results from holding non-tradable loans.
A
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If a higher price for wheat decreases the quantity of corn being produced, which of the following describes what has occurred?
A) The supply of wheat increased and the supply of corn decreased. B) The quantity of wheat supplied increased and quantity of corn supplied decreased. C) The supply of wheat increased and the quantity of corn supplied decreased D) The quantity of wheat supplied increased and the supply of corn decreased. E) The supply of wheat decreased and the supply of corn decreased.
Suppose losses cause industry Z to contract, and as a result, the prices of inputs used intensively in the industry's production process fall. We know, as a result, that industry Z is: a. an increasing cost industry
b. a constant cost industry. c. a decreasing cost industry. d. experiencing diminishing returns.