The Problem of Adverse Selection Helps to Explain

question 69

Multiple Choice

The problem of adverse selection helps to explain

• A) which firms are more likely to obtain funds from banks and other financial intermediaries, rather than from securities markets.
• B) why collateral is an important feature of consumer, but not business, debt contracts.
• C) why direct finance is more important than indirect finance as a source of business finance.
• D) only A and B of the above.

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Definitions:

Authentic Self-disclosure

The act of revealing one's true thoughts, feelings, and experiences to others in a genuine and sincere manner.

Appropriate Form

The correct or suitable way of doing something, according to specific standards or conventions.

Lack of Trust

The absence of confidence in someone or something, often resulting in suspicion or caution.

Self-disclosure

The act of revealing personal information about oneself to others, fostering intimacy and trust in relationships.