Banks will make loans as long as r where r is the

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Unformatted text preview: quality is uniformly distributed, then [Pen. 0] A. excess demand will cause the price of second‐and cars to increase. B. the market will clear but only bad quality cars will be traded. C. the market will unravel completely. D. markets will be complete. E. Abstain 16. If your marginal utility of money is increasing at an increasing rate you will: [Pen. 0.5] A. Get more pleasure from a dollar gained than displeasure from a dollar lost. B. Be likely to accept some unfair gambles C. Not buy extended warrantees for most household appliances. D. F it all of the above options since they are consistent with each other. E. Abstain Use the following information to answer Question 17. Consider the market for credit, where all potential loan applicants receive a credit rating, on a scale of 1 (lowest risk) to 100 (highest risk) that is used by banks in assessing the risk of making a loan to any particular individual. Let the riskiness of potential loan applicants be represented by δ and assume that risk is uniformly distributed o...
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This note was uploaded on 05/23/2011 for the course ECON 203 taught by Professor Jules during the Spring '11 term at University of Cape Town.

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