The Notion That Lenders Must Select from a Pool of Bad

question 13

Multiple Choice

The notion that lenders must select from a pool of bad credit risks,because the most undesirable borrowers are those that most actively seek out a loan is known as the ________.

• A)moral hazard problem
• B)ornamental torsion problem
• C)adverse selection problem
• D)asymmetric innovation problem

---

Definitions:

Insurable Interest

A stake in the value of an entity or event for which an insurance policy is purchased to mitigate risk of loss.

Consulting Partnership

A business arrangement where two or more individuals or entities collaborate to offer consulting services, pooling expertise and resources.

Insurance Company

A company that offers financial protection to individuals and entities against potential losses or damages in exchange for payment of premiums.

Innocent Misrepresentation

A false statement made by someone who believes it to be true, which can lead to a contract being voided if it influenced the agreement.