Which of the following is an example of an adverse selection problem?
A)A customer purchases four apples, two of which are bruised.
B)A card shop puts its Halloween merchandise on sale on November 1st.
C)A young job applicant fails to reveal that she was fired from her last job because she was incompetent.
D)A man rents a car and then drives it less carefully and fills it with cheaper gas than he would if he owned it.

Question

Quizplus · Accepted Answer

Adverse selection occurs when one party in a transaction has more information than the other, typically leading to a poor outcome for the less informed party. In choice C, the job applicant withholding information about her past job performance is an example of adverse selection, as the employer is making a decision without all the relevant information.

Which of the Following Is an Example of an Adverse