Adverse Selection in a Public Stock Company Occurs When

question 98

Multiple Choice

Adverse selection in a public stock company occurs when

• A) information asymmetry increases the likelihood of selecting inferior alternatives.
• B) a firm's work tasks, incentives, and employment contracts minimize opportunism by agents.
• C) a principal is not aware of the context from which information from an agent is derived.
• D) an agent manipulates information to benefit stockholders.

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Definitions:

Strict Rules

Regulations that are rigorously enforced or adhered to, allowing little flexibility or deviation from the norm.

Punished

The act of imposing a penalty or consequence for a disapproved behavior, intended to reduce or eliminate that behavior.

Authoritarian

A leadership or parenting style characterized by strict obedience, control, and a lack of responsiveness to the needs or opinions of others.

Single-parent Families

Family units that consist of one parent living with their children, often due to circumstances such as divorce, separation, death, or single parenthood by choice.