One method that lenders use to mitigate the adverse selection problem is to
A) charge higher interest rates to less creditworthy borrowers.
B) monitor closely the behavior of borrowers after a loan is made.
C) ration credit.
D) provide default insurance.
C
You might also like to view...
The Malthusian population trap model has been criticized on the grounds that it
(a) ignores the role of technological progress. (b) assumes that population growth is primarily determined by individual choice over the number of children to have. (c) both (a) and (b) are correct. (d) neither (a) nor (b) is correct.
A utility-maximizing consumer who is considering two goods, x and y, would allocate her budget in such a way that
a. MUx = MUy b. MUx > MUy c. MUx/Px > MUy/Py d. MUx/Px = MUy/Py e. MUx/Px < MUy/Py
Refer to Figure 4.3. Which diagram most likely represents the indifference map for a good and a "bad"?
A. A
B. B
C. C
D. D
A consulting company estimated market demand and supply in a perfectly competitive industry and obtained the following results:Qd = 25,000 ? 5,000P + 25MQs = 240,000 + 5,000P ? 2,000PI where P is price, M is income, and PI is the price of a key input. The forecasts for the next year are 
? = $15,000 and 
I = $20. Average variable cost is estimated to beAVC = 14 ? 0.008Q + 0.000002Q2 Total fixed cost will be $6,000 next year. What is the price forecast for next year?
A. $12 B. $68 C. $60 D. $20