Which of the following is NOT true regarding adverse selection?
A)It involves avoiding individuals who will have no interest in your offering.
B)It involves avoiding individuals who will not qualify for your offering.
C)Adverse selection wastes time and money in company promotional efforts.
D)Adverse selection can create bad word-of-mouth.
E)all of the above are true

Question

Quizplus · Accepted Answer

All the statements provided about adverse selection are incorrect in the context of its standard definition. Adverse selection actually refers to a situation where sellers have information that buyers do not have, or vice versa, about some aspect of product quality. In the context of insurance, for example, it refers to a situation where individuals who are more likely to make a claim are more eager to buy insurance, potentially leading to higher premiums for everyone. The statements given misrepresent the concept by suggesting it's about avoiding certain individuals, which is not the core issue of adverse selection.

Which of the Following Is NOT True Regarding Adverse Selection