Because of the Adverse Selection Problem

question 19

Multiple Choice

Because of the adverse selection problem

• A)good credit risks are more likely to seek loans causing lenders to make a disproportionate amount of loans to good credit risks.
• B)lenders may refuse loans to individuals with high net worth,because of their greater proclivity to "skip town."
• C)lenders are reluctant to make loans that are not secured by collateral.
• D)lenders will write debt contracts that restrict certain activities of borrowers.

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Definitions:

Self-Centering

The practice or tendency to focus on oneself and one's own needs, often at the expense of others.

Adaptation

The process of adjusting or changing to fit new conditions or environments, often through learning or evolution.

Information Triage

The process of prioritizing information based on urgency and importance, to efficiently manage and respond to data.

Social Decentering

Cognitive process in which we take into account another person’s thoughts, feelings, values, background, and perspective.