Chapter 1

D) a warranty on a good car is a false signal. Answer: A . Diff: 1. Topic: Responses to Adverse Selection. 6) If the market interest rate is 5% and a bank advertises loans at 12%, the bank will receive . A) no applications. B) applications from mostly low-risk borrowers. C) applications from mostly high-risk borrowers. D) a moral hazard. Answer ... ................
................