Which of the Following Is a Problem of Adverse Selection

question 90

Multiple Choice

Which of the following is a problem of adverse selection?

• A) The lender has a problem of distinguishing good risk from bad risk borrowers.
• B) The lender has a problem determining that the proceeds from a loan are being used as the borrower stated.
• C) A person takes up the hobby of bungee jumping after purchasing health insurance.
• D) Individuals use more medical services as a result of their purchase of a health insurance plan.

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Definitions:

Representative Sample

A subset of a population that accurately reflects the members of the entire population, used in statistical analysis or research studies.

Sampling Frame

A list or database from which a sample is drawn for a study, representing the entire population of interest.

Reliability

Reliability is the degree to which a measurement procedure yields consistent results.

Variable

A concept that can take on more than one value.