Financial Intermediaries Are Able to Act as Delegated Monitors for Individual

question 44

Multiple Choice

Financial intermediaries are able to act as delegated monitors for individual savers because

• A)other investors are unable to gain a free ride on their monitoring efforts.
• B)borrowers consider this role to be traditional for financial intermediaries and are willing to put up with it.
• C)the federal government has granted them waivers from laws protecting privacy.
• D)they employ a vast network of private detectives to carry out their monitoring role.

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Definitions:

Barriers to Entry

Factors that make it difficult for new firms to enter a market, including high startup costs, strict regulations, and existing competition.

Channels of Distribution

The paths or routes through which goods and services flow from the producer to the consumer or end user.

Herbert Simon

was an American economist and cognitive psychologist known for his contributions to decision-making theory and artificial intelligence.

Nobel Laureate

An individual who has been awarded the Nobel Prize, recognizing outstanding contributions to humanity in fields such as literature, peace, economics, medicine, and science.