Which firm is not dealing with adverse selection
A)a manufacturer forgoes a usual 90 day probationary period for new employees
B)a temporary clerical agency requires a typing test
C)a manufacturer requires suppliers to be ISO 9000 certified
D)Smokers get the worse life insurance rates as non-smokers

Question

​Which firm is not dealing with adverse selection
A)​a manufacturer forgoes a usual 90 day probationary period for new employees
B)a temporary clerical agency requires a typing test
C)a manufacturer requires suppliers to be ISO 9000 certified
D)​Smokers get the worse life insurance rates as non-smokers

Quizplus · Accepted Answer

Adverse selection occurs when one party in a transaction has more information than the other, typically leading to a poor outcome for the less informed party. In choice A, forgoing a probationary period does not directly relate to adverse selection, as it does not involve screening or sorting based on information asymmetry. Choices B, C, and D involve measures to mitigate adverse selection by requiring certain qualifications or adjusting prices based on risk information.

​Which Firm Is Not Dealing with Adverse Selection

Which Firm Is Not Dealing with Adverse Selection