Because of the Adverse Selection Problem

question 37

Multiple Choice

Because of the adverse selection problem,

• A) good credit risks are more likely to seek loans, causing lenders to make a disproportionate amount of loans to good credit risks.
• B) lenders may refuse loans to individuals with high net worth, because of their greater proclivity to "skip town."
• C) lenders are reluctant to make loans that are not secured by collateral.
• D) all of the above.

---

Definitions:

Mental Processes

Internal, covert activities of our minds, including thinking, reasoning, and memory.

Psychoanalytic

A psychological theory or technique that emphasizes unconscious mental processes and early childhood experiences.

Behaviorism

A theory of learning which states that all behaviors are acquired through conditioning processes influenced by the environment, without the need for internal thoughts or feelings.

Psychoanalysis

A therapeutic approach and theory of psychotherapy developed by Sigmund Freud that emphasizes the role of unconscious factors in driving human behavior.