(Solved):1) What does moral hazard mean? 2) What is the difference between adverse selection and moral hazard? 3) If borrowers and lenders had perfect information about each other, moral-hazard and adverse-… View Answer…

 

Question

1) What does moral hazard mean?

2) What is the difference between adverse selection and moral hazard?

3) If borrowers and lenders had perfect information about each other, moral-hazard and adverse-selection problems would no longer exist in loan markets. Why?

4) Rich people often worry that others will seek to marry them only for their wealth. How may they face a problem of adverse selection?

 

EXPERT ANSWER

(1) Moral hazard is a type of risk that is taken by the

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