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Economic Vocabulary, Claims, and Assumptions
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Grade Level
Economics & Financial Literacy
12.8 Economic Vocabulary, Claims, and Assumptions
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Adverse selection is defined as a problem that occurs when higher-risk participants are more likely to enter a market because of hidden information. Which classification best fits the phrase?
A
Economic vocabulary term - it is the concept name adverse selection, not an assumption or policy judgment.
B
Normative claim - it makes a value judgment about whether insurers should reject risky applicants.
C
Economic assumption - it holds all applicants knowing their own risk in place to simplify reasoning.
D
Positive claim - data on risk levels among participants entering the market could support or refute it.
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