Consider the case of a competitive credit market in which borrowers bring their

Question

Consider the case of a competitive credit market in which borrowers bring their own wealth to the project and there is a very large number of potential lenders, which compete for the same borrowers. Select the statements that are true. Select one or more: O a. The marginal borrower is the borrower that has the highest marginal utility of money. b. Among the would-be borrowers that are actually able to borrow, the higher their wealth, the lower the interest rate they will pay Among the would-be borrowers that are actually able to borrow, the higher their wealth, the higher the interest rate they will pay d. In general, all borrowers do better in the competitive market case than they do in the case of a monopolistic lender. This is because in the former, every lender is reduced to its fallback position, and the borrowers receive all the economic surplus e.There may be some borrowers that are excluded from the market because of insufficient wealth

Explanation / Answer

Solution: The marginal borrower is the borrower that has the highest marginal utility of money

Explanation: In a competitive market marginal utility of money is the amount of value (happiness) received from a hike in amount of money available to; thus the marginal borrower is the borrower that has the highest marginal utility of money

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