Suppose Sally Buys a Volvo Because They Are Safe And

question 25

Multiple Choice

Suppose Sally buys a Volvo because they are safe and, as a result, drives faster and pays less attention to other cars on the road.This is an example of

• A)the winner's curse
• B)a positive externality
• C)irrational behavior
• D)moral hazard
• E)adverse selection

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Definitions:

Investment Banks

Financial institutions that assist individuals, corporations, and governments in raising capital by underwriting and/or acting as the client's agent in securities issuance.

Tax Deductibility

Refers to the ability to subtract an expense from one's taxable income, thereby reducing the overall tax liability.

Equity Loans

These are loans where the borrowed amount is secured by the borrower's equity in their property, typically a home.

Household Debt

The total amount of money that all members of a household owe to outside parties, including mortgages, credit cards, and loans.