Adverse selection in employment is more likely when
A) jobs require specific training.
B) everyone is equally qualified for the job.
C) people's abilities are easy to measure.
D) people's abilities are difficult for potential employers to observe.

Question

Quizplus · Accepted Answer

Adverse selection in employment is more likely when people's abilities are difficult for potential employers to observe. This can occur, for example, when the job involves tasks that are difficult to demonstrate during an interview or when the applicant's track record is not available. In such cases, employers may have difficulty distinguishing between high-quality and low-quality job applicants, which can lead to adverse selection, where the employer chooses the candidate who is the least risky but not necessarily the best performant employee.

Adverse Selection in Employment Is More Likely When