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© 2014 Pearson Canada Inc.#
- If bad credit risks are the ones who most actively seek loans then financial intermediaries face
the problem of ____.
A) moral hazard
B) adverse selection
C) free-riding
D) costly state verification
Answer: B
Diff: 2 Type: MC Page Ref: 165
Skill: Recall
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard
5 ) An example of the ____ problem would be if Brian borrowed money from Sean in order
to purchase a used car and instead took a trip to Atlantic City using those funds.
A) moral hazard
B) adverse selection
C) costly state verification
D) agency
Answer: A
Diff: 2 Type: MC Page Ref: 165
Skill: Applied
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard
The analysis of how asymmetric information problems affect economic behavior is called
____ theory.
A) uneven
B) parallel
C) principal
D) agency
Answer: D
Diff: 1 Type: MC Page Ref: 165
Skill: Recall
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard
Nobel prize winner George Akerlof is associated with the "____ problem."
A) lemons
B) efficient markets
C) riskiness
D) volatility
Answer: A
Diff: 1 Type: MC Page Ref: 165
Skill: Recall
Objective List: 8.1 Depict how asymmetric information results in adverse selection and moral
hazard