Because of the Adverse Selection Problem

question 104

Multiple Choice

Because of the adverse selection problem,

• A) lenders may make a disproportionate amount of loans to bad credit risks.
• B) lenders may refuse loans to individuals with low net worth.
• C) lenders are reluctant to make loans that are not secured by collateral.
• D) all of the above.

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Definitions:

Payroll Costs

Expenses related to compensating employees, including wages, salaries, and benefits.

Higher Turnover Rates

A situation where an organization experiences an above-average frequency of employees leaving or being replaced within a given period.

Pension Claims

Applications submitted by retired employees or their beneficiaries to receive retirement benefits as per the pension plan provided by their employer.

Recruiting

The process of identifying, attracting, interviewing, selecting, and hiring employees to fill job vacancies within an organization.