Because of the Adverse Selection Problem

question 104

Multiple Choice

Because of the adverse selection problem,

• A) lenders may make a disproportionate amount of loans to bad credit risks.
• B) lenders may refuse loans to individuals with low net worth.
• C) lenders are reluctant to make loans that are not secured by collateral.
• D) all of the above.

---

Definitions:

Decisions

The process of making choices among various alternatives to achieve a desired outcome.

Suggestions

Recommendations or pieces of advice aimed at proposing a course of action.

Efficiency Wage Theory

Explanation for the presence of unemployment and wage discrimination which recognizes that labor productivity may be affected by the wage rate.

Productivity

The measure of the efficiency of production, often quantified as output per unit of input.