All of the following are consequences of adverse selection on good firms EXCEPT
A)the cost of external financing increases.
B)firms need to rely more on internal funds.
C)firms need to rely more on accumulated profits.
D)firms will only be able to attain financing from the government.

Question

Quizplus · Accepted Answer

Adverse selection on good firms will increase the cost of external financing, making it harder for firms to access external sources of funding. This may force firms to rely more on internal funds and accumulated profits to finance their projects. However, it does not imply that firms will only be able to attain financing from the government.

All of the Following Are Consequences of Adverse Selection on Good