Which of the Following Statements Is False

question 8

Multiple Choice

Which of the following statements is false?

• A) Because we are getting the entire asset when we purchase it with the loan, the loan payments are higher than the lease payments.
• B) In a perfect market, the cost of leasing and then purchasing the asset is equivalent to the cost of borrowing to purchase the asset.
• C) With a lease we are financing the entire cost of the asset; with a standard loan we are financing only the cost of the economic depreciation of the asset during its life.
• D) The amount of the lease payment will depend on the purchase price, the residual value, and the appropriate discount rate for the cash flows.

Examine how moral hazard affects the behavior of individuals and institutions post-contract.

Explore the utilization of warranties, education, and extracurricular activities as market signals.

Assess the impact of adverse selection on the insurance market and healthcare industry.

Understand the strategies employed by individuals and firms to communicate quality in uncertain market conditions.

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Definitions:

Bailment

The transfer of a chattel by the owner to another for some purpose, with the chattel to be later returned or dealt with in accordance with the owner’s instructions.

Reasonable Care

The standard of care that a reasonably prudent person would observe under a given set of circumstances.

Bailee for Reward

A bailee for reward refers to an individual or entity that has temporary possession of someone else’s property in exchange for payment, bound to take care of the property.

Negligent Loading

The improper or careless loading of cargo onto a mode of transportation, leading to damage or accidents.