One difference between moral hazard and adverse selection is
A)Adverse selection has to do with unobservable characteristics of individuals
B)Adverse selection has to do with unobservable actions of individuals
C)Adverse selection is when individuals most appropriate for positions are most likely to apply for them
D)Adverse selection is when you choose the wrong answer on a test

Question

​One difference between moral hazard and adverse selection is
A)​Adverse selection has to do with unobservable characteristics of individuals
B)Adverse selection has to do with unobservable actions of individuals
C)Adverse selection is when individuals most appropriate for positions are most likely to apply for them
D)​Adverse selection is when you choose the wrong answer on a test

Quizplus · Accepted Answer

Moral hazard occurs when individuals take risks because they know others will bear the costs. Adverse selection occurs when individuals with certain unobservable characteristics are more likely to participate in a transaction than others.

​One Difference Between Moral Hazard and Adverse Selection Is

One Difference Between Moral Hazard and Adverse Selection Is