The Concept of Adverse Selection Helps to Explain All of the Following

question 33

Multiple Choice

The concept of adverse selection helps to explain all of the following except

• A) why firms are more likely to obtain funds from banks and other financial intermediaries, rather than from the securities markets.
• B) why indirect finance is more important than direct finance as a source of business finance.
• C) why direct finance is more important than indirect finance as a source of business finance.
• D) why the financial system is so heavily regulated.

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Definitions:

Furniture Salesperson

An individual specialized in selling furniture by assisting customers in selecting and purchasing furniture items that meet their needs and preferences.

Analogy

An analogy is a comparison between two things, typically for the purpose of explanation or clarification.

Proposal Document

A written offer or plan detailing how one party can meet the needs or requirements of another, often used in business transactions.

Formula Sales

A structured approach to selling that follows a specific pattern or formula, often used in training new sales personnel.