Moral Hazard Problems Arise When

question 81

Multiple Choice

Moral hazard problems arise when

• A)lenders have difficulty in distinguishing between good and lemon firms.
• B)when a downturn in economic activity makes repaying loans difficult for borrowers.
• C)borrowers have an incentive to act in ways that do not reflect the lender's interests.
• D)borrowers default on loans.

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