The Problem for Lenders, That a Borrower Has the Incentive

question 32

Multiple Choice

The problem for lenders, that a borrower has the incentive to take chances once the loan is made, is an example of

• A) adverse selection.
• B) moral hazard.
• C) both of the above.
• D) neither of the above.

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Definitions:

Summarized Operations

An overview of an organization's activities, typically presented in an annual report to provide stakeholders with information about its performance and financial status.

Production

The process of creating, growing, manufacturing, or improving goods and services.

Factory Overhead

Costs associated with manufacturing operations that are not directly tied to a specific product, such as utilities, maintenance, and management salaries.

Direct Labor Cost

The wages and benefits paid to employees who are directly involved in the production of goods or services.