The Problem of Adverse Selection

question 140

Multiple Choice

The problem of adverse selection:

• A)occurs when sellers (who know more than buyers about the quality of the product)deliberately select inferior products to sell.
• B)is also referred to as the moral hazard problem.
• C)can result in an overall increase in the gains from trade.
• D)occurs when an employer fires the wrong person.

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Definitions:

β-galactosidase Enzyme

An enzyme that catalyzes the hydrolysis of β-galactosides into monosaccharides, primarily involved in lactose breakdown.

Lac Operon

A gene regulatory mechanism in bacteria where the metabolism of lactose is controlled by the interaction of several genes and protein products.

Mutation

A change in the DNA sequence within an organism's genome, which can lead to variations in physical appearance, function, or behavior.

Lactose

A sugar present in milk and dairy products, consisting of glucose and galactose units.