The Existence of Adverse Selection Results in

question 76

Multiple Choice

The existence of adverse selection results in

• A) reduced market efficiency.
• B) an increase in the likelihood of moral hazard.
• C) an increase in market transactions.
• D) higher transactions costs.

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Definitions:

Market Period

A very short duration in economics during which the supply of a good is fixed and cannot be adjusted in response to changes in demand.

Long Run

The long run is a period of time in economics where all inputs and factors of production can be varied, allowing companies to adjust all their resources.

Short Run

A period in economics during which at least one input, such as plant size or capital, is fixed, limiting the capacity to adjust to changes in demand or production volume.

Inelastic Demand

A demand relationship in which a given percentage change in price results in a smaller percentage change in quantity sold.