Asked by Brendamaris Vasquez on Sep 24, 2024
Verified
A firm deciding to hire a secretary,bases its decision on how well the candidate is trained on certain software.This practice addresses:
A) Adverse selection
B) Moral hazard
C) Forced bankruptcy
D) None of the above
Adverse Selection
A situation where asymmetric information leads to the selection of poor-quality or unsuitable candidates or products, commonly seen in insurance and market transactions.
Secretary
A professional responsible for managing administrative tasks and facilitating smooth operations within an organization.
Trained
Refers to individuals who have received instruction or education in a specific skill or field.
- Differentiate between moral hazard and adverse selection.
- Understand mechanisms for reducing adverse selection in markets.
Verified Answer
MR
Maximiliano Ramirezabout 3 hours ago
Final Answer :
A
Explanation :
Adverse selection refers to a situation where one party has more information than the other party, causing the latter to make an inefficient decision. In this case, the firm is trying to avoid adverse selection by hiring a secretary who is well-trained on certain software, indicating that they have the necessary skills for the job.
Learning Objectives
- Differentiate between moral hazard and adverse selection.
- Understand mechanisms for reducing adverse selection in markets.