When the Least Desirable Credit Risks Are the Ones Most

question 22

Multiple Choice

When the least desirable credit risks are the ones most likely to seek loans,lenders are subject to the

• A) moral hazard problem.
• B) adverse selection problem.
• C) shirking problem.
• D) free-rider problem.
• E) principal-agent problem.

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Definitions:

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The method of gathering data through immediate, firsthand experience and observation in a natural or control setting.

Reasoning

The process of thinking about something in a logical way to form a conclusion or judgment.

Knowledge

Information, understanding, or skill that one gains through experience or education.

Premises

Statements or propositions from which another is inferred or follows as a conclusion.