A Lender Faces A(n) ________ Problem When the Lender Lends

question 23

Multiple Choice

A lender faces a(n) ________ problem when the lender lends funds to a borrower for a specific purpose and the borrower then opportunistically uses the funds for another purpose.

• A) adverse selection
• B) moral hazard
• C) external cost
• D) free‐rider

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Definitions:

Finished Goods Inventory

The stock of completed products ready for sale at the end of an accounting period.

Cost of Goods Manufactured

The total production cost of goods completed during a specific period, including materials, labor, and overhead costs.

Direct Labor Usage

The total amount of labor directly involved in the manufacturing process, often used in calculating production costs and efficiency.

Factory Wages Payable

An account representing the amounts owed to manufacturing personnel for wages that have been earned but not yet paid.