To the Extent That the Undervaluation of the Riskiness of Mortgage-Backed

question 48

Multiple Choice

To the extent that the undervaluation of the riskiness of mortgage-backed securities contributed to the financial crisis of 2008-2009, blame for this mistake lies with:

• A) mortgage brokers.
• B) investment banks.
• C) rating agencies.
• D) government policymakers.

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Definitions:

Barriers To Entry

Are obstacles that make it difficult for new competitors to enter a market, including high startup costs, strict regulations, and established brand loyalty among consumers.

Excess Capacity

Plant resources that are underused when imperfectly competitive firms produce less output than that associated with achieving minimum average total cost.

Product Differentiation

A marketing strategy that businesses use to distinguish their products or services from those of competitors.

Competitive Element

A factor that distinguishes a company in the marketplace, often related to quality, price, or innovation, aiding in achieving a competitive advantage.