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? Explain.

In this situation, we consider the police officer as a "buyer", who selects a candidate, a "seller". Adverse selection happens when sellers have information buyers do not have. A moral hazard is a risk that an applicant misleads police officers. The police officer does not know much about the applicant, and the applicant may be dishonest and provide misleading information. They choose to rely on a college degree to examine the applicant's qualifications. Because a college degree is publicly known, it is trustworthy and will not give any misleading information. It decreases the risk of moral hazard and adverse selection. They believe the applicant qualify for this job if he has a college degree.

Adverse selection is the information buyers do not have. A moral hazard is a risk that a party provides misleading information.