Adverse Selection Is the Tendency for People Who Accept Contracts

question 103

Multiple Choice

Adverse selection is the tendency for people who accept contracts to be those who

• A) buy goods and then regret it later.
• B) buy goods for more than their own reservation price.
• C) plan to use private information to the disadvantage of the less well-informed party.
• D) engage in a number of searches larger than that specified in the contract.

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Definitions:

Decane

A straight-chain alkane with the chemical formula C10H22, commonly used in solvents and as a constituent of gasoline.

Alkane

A hydrocarbon compound consisting entirely of hydrogen and carbon atoms, arranged in a tree structure with single bonds, part of the paraffin series.

Formula

A representation of a substance using symbols and numbers to indicate the types and numbers of atoms present.

Lewis Dot Structure

A diagram showing the bonding between atoms of a molecule and the lone pairs of electrons in the molecule.