match each of the rationales for finacial intermediation listed below with at least one of the following: insurance company, pension fund, savings bank.

Question

a. adverse selection
b. moral hazard
c. lower managment cost generated by larger scale

Answer 1

http://finance.factexpert.com/531-financial-intermediation.php

I am not certain what moral hazard means.

Answer 2

moral hazard- the possibility that a borrower might negage in riskier behavior after a loan has been obtained.

Answer 3

Well, then moral hazard can apply to all. Whomever borrows money, that you approved, should not be changing the use of the money (with its risks) to which you approved.
Insurance certainly would not want to select probable adverse events...unless the risk premium is high.
large scale: all three can benefit from scale.