Banks Overcome the Free-Rider Problem Faced by Private Information-Collection Firms

question 84

Multiple Choice

Banks overcome the free-rider problem faced by private information-collection firms in financial markets by

• A)charging only for information depositors find useful.
• B)charging both depositors and borrowers for information.
• C)mainly holding loans which are not traded in financial markets.
• D)mainly holding securities which have active secondary markets.

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Definitions:

Market Structures

Refers to the organization and characteristics of different markets, varying by the number of firms, type of products, and level of competition.

Product Variety

The assortment or range of different goods or services offered by a seller or available in a market.

Pure Competition

Also known as perfect competition, it is a market structure characterized by a large number of buyers and sellers, homogenous products, and free entry and exit from the market.

Monopolistic Competition

A market structure featuring many firms selling similar but not identical products, allowing for some degree of market power and price differentiation among competitors.