Adverse Selection

question 65

Multiple Choice

Adverse selection

• A)refers to the private, self-interested actions that people pursue, which, when taken collectively, lead to a loss in economic surplus.
• B)refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off.
• C)refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.
• D)refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction.

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Definitions:

Goal System

A structured approach to setting, monitoring, and achieving objectives within an organization, often linked to performance management.

Job Evaluation System

A method used by organizations to assess the value of each job in relation to others within the company to determine appropriate compensation levels.

Point Method

A technique used in job evaluation that involves quantifying job elements to determine the value of a position within an organization.

Competency-Based Pay

A salary system that bases compensation on an employee's skills, abilities, and performance rather than job title or position alone.