Bank X had a reputation for asking few questions when it provided loans. Five years later, the majority of the loans were not repaid. This is because the bank had failed to address the
A) moral hazard problem. B) free-rider problem.
C) contrary selection problem. D) adverse selection problem.
Question 2
If capital per hour of labor increases, GDP per hour of labor
A) increases because the level of technology advances.
B) increases for a given level of technology.
C) changes only if technology also advances.
D) decreases for a given level of technology.
E) decreases because the level of technology decreases.
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