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Author Question: Moral hazard may arise in lending when small firms borrow funds from banks for one project (e.g., ... (Read 135 times)

lracut11

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on: Jul 1, 2018
Moral hazard may arise in lending when small firms borrow funds from banks for one project (e.g., buy new machinery for a factory) and actually use the funds in other ways (e.g., buy the manager a new corporate jet).
 
  What is the source of the asymmetric information problem in this case? A) The bank has more information about the true cost of the corporate jet than the firm.
  B) The bank has more information about the opportunity cost of the loaned funds.
  C) The firm has more information about the actual use of the funds than the bank.
  D) The firm has more information about the interest rate on the loan than the bank.

Question 2

Each step up the education ladder improves the incomes of white males but not of black males.
 
  Indicate whether the statement is true or false


cpetit11

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Reply #1 on: Jul 1, 2018
Answer to Question 1

C

Answer to Question 2

F


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