Moral Hazard Problems Arise When

question 10

Multiple Choice

Moral hazard problems arise when

• A) lenders have difficulty in distinguishing between good and lemon firms.
• B) a downturn in economic activity makes repaying loans difficult for borrowers.
• C) borrowers default on loans.
• D) borrowers have an incentive to conceal information.

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Definitions:

Phenylketonuria

A genetic disorder characterized by the body's inability to break down the amino acid phenylalanine, leading to harmful buildup.

Recessive Gene

A gene that expresses its phenotypic trait only when homozygous, as its effect is masked by a dominant gene when heterozygous.

Mental Retardation

Mental retardation is an outdated and offensive term formerly used to describe a condition characterized by significantly below-average intellectual functioning and a lack of skills necessary for daily living; the preferred term is now "intellectual disability."

Phenylalanine

An essential amino acid required for the biosynthesis of proteins, not synthesized by the human body and obtained through diet.