Exam 8: An Economic Analysis of Financial Structure

A problem for equity contracts is a particular type of ________ called the ________ problem.

Although debt contracts require less monitoring than equity contracts, debt contracts are still subject to ________ since borrowers have an incentive to take on more risk than the lender would like.

The current structure of financial markets can be best understood as the result of attempts by financial market participants to ________.

The "lemons problem" is a term used to describe the ________.

High net worth helps to diminish the problem of moral hazard problem by ________.

How does a mutual fund lower transactions costs through economies of scale?

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

How does collateral help to reduce the adverse selection problem in credit market?

The remedies for the adverse selection include all but the following.

A lesson of the Enron collapse is that government regulation ________.

The problem of adverse selection helps to explain ________.

One way of describing the solution that high net worth provides to the moral hazard problem is to say that it ________.

Government regulations require publicly traded firms to provide information, reducing ________.

Nobel prize winner George Akerlof is associated with the "________ problem."

Explain the problem of asymmetric information, adverse selection and moral hazard, and why these problems are important for the financial system.

A key finding of the economic analysis of financial structure is that ________.

Analysis of adverse selection indicates that financial intermediaries, especially banks, ________.

Which of the following statements concerning external sources of financing for nonfinancial businesses in Canada is true?

That most used cars are sold by intermediaries (i.e., used car dealers) provides evidence that these intermediaries ________.

The "lemons problem" exists because of ________.