There is frequent confusion about the terms asymmetric information, moral hazard and adverse selection?Asymmetric information is the cause, moral hazard and adverse selection are the outcome.Your job will be to see what these have to do with hiring a police officer.

Many police officer positions require the applicant to have a college degree even though the tasks of a police officer rarely call upon college course material. Why don't police departments increase their applicant pool by dropping this requirement?As you answer this question think back the problem of Type 1 and 2 errors and the human tendency to be risk-averse.