Borrowers who default are more likely to seek loans than the borrowers who don't default.This is an example of
A)irrational expectations.
B)rent-seeking behavior.
C)moral hazard.
D)adverse selection.

Question

Quizplus · Accepted Answer

This is an example of adverse selection, where borrowers with a higher risk of default are more likely to seek loans, while borrowers with lower risk are less likely to seek loans. This is because lenders cannot easily distinguish between high and low-risk borrowers, and therefore the pool of borrowers is likely to be dominated by those with a higher risk of default.

Borrowers Who Default Are More Likely to Seek Loans Than