Which of the Following Is Not True of Adverse Selection

question 91

Multiple Choice

Which of the following is not true of adverse selection?

• A) It exists because information is perfect.
• B) It describes the problem a lender faces in identifying loan applicants as good or bad risk borrowers.
• C) It arises because borrowers have more information than lenders regarding their creditworthiness.
• D) It arises if lenders try to charge an average price to all applicants.

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Definitions:

Advisory Verdict

A non-binding judgment provided by a jury to guide a judge in making a final verdict, often used in complex cases or in civil law systems.

Med-Arb

A form of ADR that combines the best aspects of both mediation and arbitration. The parties first submit to a mediation session. If the matter cannot be settled, it moves to an arbitration hearing.

Lawyer

A professional who practices law, representing and advising individuals, businesses, and government agencies on legal issues and disputes.

Negotiation

The process by which two or more parties with different needs or goals discuss an issue in an attempt to reach a compromise or agreement.