One method that lenders use to mitigate the adverse selection problem is to
A)charge higher interest rates to less creditworthy borrowers.
B)monitor closely the behavior of borrowers after a loan is made.
C)ration credit.
D)provide default insurance.

Question

Quizplus · Accepted Answer

Credit rationing is used to mitigate adverse selection by limiting the amount of credit available to borrowers, thus reducing the risk of lending to those who may not be creditworthy.

One Method That Lenders Use to Mitigate the Adverse Selection