Which of the Following Best Illustrates the Adverse Selection Problem

question 64

Multiple Choice

Which of the following best illustrates the adverse selection problem?

• A)a professional football team that consistently drafts poor players
• B)an economic agent who engages in risky behavior once a loan is received
• C)an individual who hides a pre-existing condition from a health insurer
• D)an individual who experiences a lost of income by not working while attending college

Recognize the importance of product differentiation in transforming market competition types.

Understand the psychological aspects of pricing, including reference pricing and its influence on consumer perception.

Understand the principles and requirements of implementing a pay for performance system.

Describe how base pay is set in merit pay plans.

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Definitions:

Management Object

An element or goal that management aims to achieve through planning, organizing, leading, and controlling organizational resources.

Frederick Taylor

A pioneer of industrial engineering and management science, best known for his work on improving industrial efficiency through the principles of scientific management.

Maximum Prosperity

The highest level of economic well-being and wealth generation achievable by an individual, organization, or economy.

Economic Gain

The increase in financial value or benefit that results from an investment or action.