When a jeweler sells a low quality diamond to a young man who believes the diamond is the highest quality, she is engaging in
a. both moral hazard and adverse selection.
b. neither moral hazard nor adverse selection.
c. moral hazard, but not adverse selection.
d. adverse selection, but not moral hazard.
d
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The too-big-to-fail policy
A) reduces moral hazard problems. B) puts large banks at a competitive disadvantage in attracting large deposits. C) treats large depositors of small banks inequitably when compared to depositors of large banks. D) allows small banks to take on more risk than large banks.
An oligopsony exists when
a. a few sellers dominate a market. b. a few buyers dominate a market. c. a single buyer dominates a market. d. a single seller dominates a market.
The interest rate the Fed charges for secondary credit is:
A. above the primary discount rate. B. equal to the primary discount rate. C. below the market federal funds rate. D. below the primary discount rate.
Many _________ businesses raise _________ of their capital through debt.
a. small; most b. small; none c. large; most d. large; none