Because of the adverse selection problem
A)good credit risks are more likely to seek loans causing lenders to make a disproportionate amount of loans to good credit risks.
B)lenders may refuse loans to individuals with high net worth,because of their greater proclivity to "skip town."
C)lenders are reluctant to make loans that are not secured by collateral.
D)lenders will write debt contracts that restrict certain activities of borrowers.

Question

Quizplus · Accepted Answer

Adverse selection occurs when lenders cannot distinguish between high-risk and low-risk borrowers, leading them to require collateral to mitigate potential losses from lending to high-risk individuals.

Because of the Adverse Selection Problem