Because Larger Loans Create Greater Incentives for Borrowers to Engage

question 57

Multiple Choice

Because larger loans create greater incentives for borrowers to engage in undesirable activities that make it less likely they will repay the loans,banks

• A) ration credit, granting borrowers smaller loans than they have requested.
• B) ration credit, charging higher interest rates to borrowers who want large loans than to those who want small loans.
• C) ration credit, charging higher fees as a percentage of the loan to borrowers who want large loans than to those who want small loans.
• D) do none of the above.

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Definitions:

Price-Output Combination

The specific level of output and the price at which that output is sold in the market, relevant in contexts of market equilibrium and firm strategies.

Total Revenue

The total amount of money a firm receives by selling goods or services.

Elastic

refers to the responsiveness of demand or supply to changes in price or income.

Revenue Curves

Graphical illustrations that depict how a company's or industry's revenue changes in response to changes in price or other economic factors.