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Because there is an imbalance of information in a lending situation,we must deal with the problems of adverse selection and moral hazard. Define these terms and explain how financial intermediaries can reduce these problems.
MR > MC
A situation in marginal analysis where the marginal revenue (MR) exceeds the marginal cost (MC), suggesting a potential increase in profitability by expanding production.
P > ATC
A scenario in which the price of a good is greater than the average total cost of producing that good, indicating potential profitability for the firm.
Short Run
A period in economic analysis where at least one input is fixed while others can be varied.
Monopolistically Competitive Market
A monopolistically competitive market is a type of market structure characterized by many firms selling products that are similar but not identical, allowing for product differentiation.
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