Banks' Attempts to Solve Adverse Selection and Moral Hazard Problems

question 22

Multiple Choice

Banks' attempts to solve adverse selection and moral hazard problems help explain loan management principles such as

• A) screening and monitoring of loan applicants.
• B) collateral and compensating balances.
• C) credit rationing.
• D) all of the above.
• E) only A and B of the above.

---

Definitions:

Common Activity Base

A measure used in activity-based costing for allocating overhead and indirect costs to products or services based on relevant activities.

Job Cost Sheet

A document that records the materials, labor, and manufacturing overhead costs assigned to an individual job or project.

Cost Accounting

A branch of accounting focused on capturing a company's total cost of production by assessing its variable and fixed costs.

Product Costs

Costs directly attributable to the creation of a product, including direct labor, materials, and manufacturing overhead.