Adverse selection refers to the

A. possibility that the borrower may engage in riskier behavior after the loan is obtained.
B. use of statistical discrimination in making loans.
C. possession of information by one party in a financial transaction not known by the other party.
D. likelihood that a potential borrower may use the funds that he receives for unworthy, high risk projects.


Answer: D

Economics

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Once the state environmental protection agency devises its new policy to protect the environment, firms decide whether to remain in the state or move their operations to a neighboring state. In the language of game theory, this is an example of:

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