Adverse Selection Will Occur in a Market as a Result

question 38

Multiple Choice

Adverse selection will occur in a market as a result of

• A)asymmetric information.
• B)moral hazard.
• C)the sale of "lemons."
• D)rational ignorance.

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Definitions:

Adequacy

The sufficiency or appropriateness of something to fulfill a specific need, requirement, or condition.

Fraudulent

Involving deception, typically for personal gain or to damage another individual, often considered a white-collar crime.

Preemptive Rights

Rights that give existing shareholders the option to buy additional shares before the company offers them to the public, to maintain their proportionate ownership.

Outstanding Shares

Outstanding shares refer to the total number of shares of a corporation that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.