The Problem of Adverse Selection Helps to Explain

question 69

Multiple Choice

The problem of adverse selection helps to explain

• A)why firms are more likely to obtain funds from banks and other financial intermediaries,rather than from securities markets.
• B)why collateral is an important feature of consumer,but not business,debt contracts.
• C)why direct finance is more important than indirect finance as a source of business finance.
• D)why lenders refuse loans to individuals with high net worth.

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Definitions:

Ethology

The scientific study of animal behavior, often with a focus on behavior under natural conditions, and its evolution.

Specific Behaviors

Observable actions or reactions of an individual in particular contexts, which are often studied in psychology to understand various aspects of human behavior and interactions.

Child Development

The physical, cognitive, emotional, and social growth that children undergo from birth through early adulthood.

Major Theories

Fundamental concepts or principles that have been proposed to explain a wide range of phenomena in various fields of study.