Adverse Selection Is

question 402

Multiple Choice

Adverse selection is

• A)the tendency of a person who is imperfectly monitored to engage in dishonest or otherwise undesirable behavior.
• B)an action taken by an uninformed party to induce an informed party to reveal information.
• C)the failure of majority voting to produce transitive preferences for society.
• D)the tendency for the mix of unobserved attributes to become undesirable from the standpoint of an uninformed party.

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Definitions:

Asset

Resources owned or controlled by a business that are expected to provide future economic benefits, including tangible and intangible items.

Liability

An economic obligation or debt owed by a company to others, typically other businesses or employees.

Contra-Asset

An account on a company's balance sheet that reduces the total value of assets, often used for accumulated depreciation or allowances for bad debts.

Perpetual Inventory

An inventory management system that records the sale or purchase of inventory immediately through the use of computerized systems.