Which of the following is NOT a fix for an adverse selection problem? Requiring
ID: 1161076 • Letter: W
Question
Which of the following is NOT a fix for an adverse selection problem?
Requiring a given credit score in order to take on a loan.
Credibly signaling your quality with a college degree.
Requiring that shareholders of a bank maintain equity capital.
Looking at an applicant?s employment history before making a job offer.
Requiring a given credit score in order to take on a loan.
Credibly signaling your quality with a college degree.
Requiring that shareholders of a bank maintain equity capital.
Looking at an applicant?s employment history before making a job offer.
Explanation / Answer
The correct option is Requiring that shareholders of a bank maintain equity capital. Adverse selection is a situation where sellers have information buyers do not have or vice versa about the quality of the product and this leads to assymetric information