Which of the Following Is NOT True of Moral Hazard

question 5

Multiple Choice

Which of the following is NOT true of moral hazard?

• A)It would not exist in a world of perfect information.
• B)It arises because borrowers typically know more than lenders.
• C)It describes a lender's problem of distinguishing the good-risk applicants from the bad-risk applicants.
• D)It describes a lender's problem in verifying borrowers are using their funds as intended.

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Definitions:

Syllogism Validity

A measure of whether a syllogism (a form of deductive reasoning consisting of a major premise, a minor premise, and a conclusion) logically follows from its premises.

Venn Diagram

A graphical representation used to show all possible logical relations between a finite collection of sets.

Categorical Syllogism

A form of deductive reasoning consisting of a major premise, a minor premise, and a conclusion, based on relationships between categories.

Syllogism Forms

Structured arguments using three propositions: two premises followed by a conclusion, based on deductive reasoning to infer a relationship between items.