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Although Debt Contracts Require Less Monitoring Than Equity Contracts,debt Contracts

question 90

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Although debt contracts require less monitoring than equity contracts,debt contracts are still subject to ________ since borrowers have an incentive to take on more risk than the lender would like.


Definitions:

Total Costs

The combined total of expenses related to the generation of goods or services, integrating both unchanging and adjustable costs.

Market Economy

An economic system in which supply and demand from consumers direct the production of goods and services.

Market System

An economic system based on supply and demand where prices are determined in a free price system.

Consumer Sovereignty

The theory that consumers' preferences determine the production and sale of goods and services in a market.

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