Which of the following is NOT true of moral hazard?
A) It would not exist in a world of perfect information.
B) It arises because borrowers typically know more than lenders.
C) It describes a lender's problem of distinguishing the good-risk applicants from the bad-risk applicants.
D) It describes a lender's problem in verifying borrowers are using their funds as intended.
C
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In a game where individuals are asked to contribute to a public good, best response functions slope down because each individual believes the other will not give very much.
Answer the following statement true (T) or false (F)
An organic food manufacturing company has been advertising widely against the consumption of inorganic food. This is an example of ________
A) backward induction B) indoctrination C) anchoring D) sniping
If a firm's marginal costs ________ then its ________
A) fall; best-response curve shifts B) rise; forced out of the oligopoly C) rise; output increases D) fall; price falls
Chapter 11
What will be an ideal response?