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nursemegan nursemegan
wrote...
Posts: 478
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5 years ago

Question 1.

An automobile finance company faces an adverse selection problem if borrowers



▸ with a greater chance of defaulting on their car loans get loans from the lender.

▸ with no chance of defaulting on their car loans get loans from the lender.

▸ choose to get their car loans from a source other than the finance company.

▸ choose a 5-year loan as opposed to a 2-year loan.

Question 2.

A credit union faces a(n) ________ problem when it lends funds to a customer to remodel her home and the customer then opportunistically uses the funds for a gambling trip to Las Vegas.



▸ adverse selection

▸ moral hazard

▸ external cost

▸ free-rider
Textbook 
Principles of Economics

Principles of Economics


Edition: 12th
Authors:
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rinderbikrinderbik
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Posts: 391
5 years ago
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nursemegan Author
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Thanks
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Helped a lot
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