One method for solving the adverse selection problem is
A)to restrict the ability of the party with information from taking advantage of hidden information.
B)by having the government run all firms.
C)to close down firms with bad reputations.
D)All of the above.

Question

Quizplus · Accepted Answer

Restricting the ability of the party with information from taking advantage of hidden information can help to mitigate adverse selection without resorting to extreme measures such as government-run firms or shutting down entire industries. This can be done through measures such as disclosure requirements or penalties for withholding important information.

One Method for Solving the Adverse Selection Problem Is