Adverse selection means that as the number of employees a firm needs increases, it becomes increasingly difficult for it to find the right employees, place them in appropriate positions, and provide adequate supervision.

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Adverse selection refers to the problem of selecting the right employees from a pool of potential candidates. As the number of employees needed by a firm increases, there may be a larger number of underqualified or misaligned candidates, making it more difficult to find the right fit. This can lead to challenges in placing employees in appropriate positions and providing adequate supervision, as well as increased turnover and reduced productivity.

Adverse Selection Means That as the Number of Employees a Firm