Adverse Selection Exists When

question 137

Multiple Choice

Adverse selection exists when

• A)the parties on one side of the market, who have information not known to others, self select in a way that benefits the parties on the other side of the market.
• B)the parties on one side of a market charge more for something than the parties on the other side of the market want to pay.
• C)one party to a transaction changes his or her behavior in a way that is hidden from and costly to the other party.
• D)the parties on one side of the market, who have information not known to others, self select in a way that adversely affects the parties on the other side of the market.
• E)none of the above

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Definitions:

Conformity

The act of matching attitudes, beliefs, and behaviors to group norms, politics, or societal expectations.

Group Members

Individuals who belong to a specific social group or organization sharing common goals, interests, or identities.

Social Influence

Group impact on others’ decisions.

Commodification

Commodification is the transformation of goods, services, ideas, or people into commodities or objects of trade, often emphasizing the market value over other values.