Isolation and where bad debt lands

In a Morpho market, what does the liquidation incentive factor decide?

• The interest rate borrowers pay once they are liquidatable
• How much collateral a liquidator receives per unit of debt repaid, and so how much collateral a loan needs to close without a loss
• The LLTV at which a loan becomes liquidatable

A Morpho market books bad debt. Which suppliers lose?

• Every lender on Morpho, spread thinly
• Only the suppliers who withdraw afterwards
• Every supplier in that market, in proportion to their share, at once