An example of the ________ problem would be if Brian borrowed money from Sean in order to purchase a...

1) If bad credit risks are the ones who most actively seek loans then financial intermediaries face the problem of

A) moral hazard.

B) adverse selection.

C) free-riding.

D) costly state verification.

2) An example of the ________ problem would be if Brian borrowed money from Sean in order to purchase a used car and instead took a trip to Atlantic City using those funds.

A) moral hazard

B) adverse selection

C) costly state verification

D) agency

3) The analysis of how asymmetric information problems affect economic behavior is called ________ theory.

A) uneven

B) parallel

C) principal

D) agency