Financial Intermediaries Typically Require Mortgage Borrowers to Have Homeowner's Insurance

question 50

Multiple Choice

Financial intermediaries typically require mortgage borrowers to have homeowner's insurance and do credit checks before making the loan.

• A)The insurance requirement and the credit check are both designed primarily to reduce adverse selection.
• B)The insurance requirement and the credit check are both designed primarily to reduce the risk of moral hazard.
• C)The insurance requirement is designed primarily to reduce adverse selection;the credit check is designed primarily to reduce the risk of moral hazard.
• D)The insurance requirement is designed primarily to reduce the risk of moral hazard;the credit check is designed primarily to reduce adverse selection.

---

Definitions:

After Sales Service

Support provided by a company after a customer has purchased a product, including maintenance, repair services, and assistance.

Bundled

A marketing strategy wherein multiple products or services are packaged together and sold at a single price, often offered to encourage purchase.

Directly to Consumer

A business strategy where products are sold directly from the manufacturer or producer to the consumer without intermediary retailers.

Double Marginalization

A phenomenon in vertical supply chains where each layer of production adds its own markup, leading to higher prices for end consumers.