Adverse Selection Occurs in a Market When

question 41

Multiple Choice

Adverse selection occurs in a market when:

• A) one party has better information about pertinent risks.
• B) both parties have an incentive to cheat on a contract.
• C) the agent acts against the interests of the principal.
• D) one party is unable to perform the contract as specified.
• E) the cost of signaling is prohibitive.

---

Definitions:

Paradoxical Sleep

Another term for REM (Rapid Eye Movement) sleep, characterized by active brain waves, flaccid muscles, and vivid dreams.

REM Sleep

A stage of sleep characterized by rapid eye movement, low muscle tone, and vivid dreams; considered important for memory and learning.

EEG

An abbreviation for electroencephalogram, a test that measures the electrical activity of the brain.

Hypnotic Age Regression

A technique used in hypnotherapy where the patient is guided to recall and re-experience events from an earlier stage of life, often to treat and understand current psychopathological symptoms.