Exam 9: Transactions Costs, asymmetric Information, and the Structure of the Financial System

Suppose some members of Enron's board of directors are aware of the company's true financial condition,information that is not available to most investors.This is an example of

A firm's agents are its

Suppose one person buys a copy of Consumer Reports and gives away free copies to all who request one.This is an example of

Banks require collateral for loans in order to

It is generally agreed that

The "lemons problem" exists in the market for goods because

What are the information costs faced by savers?

Transaction and information costs

Which of the following is the most important source of external financing for corporations?

Which economist is credited with having been the first to discuss the "lemons problem"?

The main reason why banks are the leading source of external finance for businesses is

Which of the following is NOT true of moral hazard?

Requirements for information disclosure for firms that desire to sell securities in financial markets

The "lemons problem" is overcome in the used car market by

Symmetric information

Moral hazard problems arise when

In effect,banks are able to charge

Which of the following does NOT represent a way in which financial intermediaries take advantage of economies of scale?

Smaller firms tend to rely on financial intermediaries instead of financial markets for external financing due to

How are financial intermediaries able to reduce transactions costs?