Asked by kristian fields on Sep 24, 2024
Verified
Which firm is not dealing with adverse selection
A) a manufacturer requires a 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 same life insurance rates as non-smokers
Adverse Selection
A situation where unfair advantage is taken of a transaction due to asymmetric information between buyers and sellers.
- Identify instances and counterinstances of unfavorable selection.
Verified Answer
SP
Skyler Poileyabout 10 hours ago
Final Answer :
D
Explanation :
Smokers getting the same life insurance rates as non-smokers indicates that the firm is not dealing with adverse selection, as it is not adjusting the rates based on the higher risk associated with smoking. The other options are all examples of firms attempting to mitigate adverse selection in some way.
Learning Objectives
- Identify instances and counterinstances of unfavorable selection.