Which of the Following Is Not True of Adverse Selection

question 11

Multiple Choice

Which of the following is not true of adverse selection?

• A)It can result when one of the parties in a transaction has little information about the quality of the goods involved.
• B)It can cause the quality of the goods traded to decline if quality detection costs are high.
• C)It can be a difficult problem to overcome because it is not individually rational for the party with more information to provide a truthful and complete disclosure.
• D)It occurs in the used-car market but not in the market for insurance.
• E)It drives out the high-quality products and only the low-quality products are left in a market.

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Definitions:

Order

In mathematics, the arrangement or sequence of objects or numbers according to a specific rule, or the degree of a polynomial or differential equation.

Matrix

A rectangular array of numbers, symbols, or expressions, arranged in rows and columns, used in solving systems of linear equations and other mathematical operations.

Solution

The solution or solutions that make an equation, inequality, or system of equations true.

System Of Linear Equations

A collection of two or more linear equations involving the same set of variables.