When Sellers Are Unable to Distinguish "Good" Buyers from "Bad

question 144

Multiple Choice

When sellers are unable to distinguish "good" buyers from "bad" ones, they face the problem of

• A) moral hazard.
• B) adverse selection.
• C) externalities.
• D) diminishing utility.

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Definitions:

Pro Forma Net Income

A projected net income over a specific period, calculated under hypothetical assumptions or adjustments.

Profit Margin

A financial metric that measures the percentage of revenue that exceeds the costs of goods sold, indicating the profitability of a company.

Sales Decrease

A reduction in the amount of goods or services sold by a business within a specific time period.

Equity Financing

The method of raising capital through the sale of shares, offering investors ownership interests in the company.