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

question 94

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:

Uncertainty

The lack of complete certainty in situations, often due to incomplete information, that affects decision-making processes in economics and finance.

Market Interest Rates

The rates at which borrowers and lenders conduct transactions in the open market, influenced by the supply and demand for credit, inflation, and central bank policies.

Nominal Interest

The interest rate on a loan or investment without adjusting for inflation.

Real Interest Rates

The interest rate adjusted for inflation, reflecting the true cost of borrowing or the true yield on savings.