A Consequence of Adverse Selection Is

question 28

Multiple Choice

A consequence of adverse selection is:

• A)buyers may lose surplus they would have gained with more complete information.
• B)sellers may lose surplus they would have gained with more complete information.
• C)transactions do not take place that would have been possible if the parties had the same information.
• D)All of these statements are true.

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Definitions:

Par Value

The face value of a bond or stock as stated by the issuing company, not necessarily its market value.

Dividend Paid

Dividend Paid refers to the amount of earnings distributed by a corporation to its shareholders as a reward for their investment.

Preferred Stock

A type of stock issued by corporations, which gives holders a right to share in earnings and liquidation before common shareholders do.

Capital Stock

The general term applied to the shares of a corporation.