Which of the following is a classic example of adverse selection?
A)People who have health insurance taking poor care of their health.
B)Workers who put in less effort when their effort isn't closely monitored.
C)The imbalance of information that exists between used car buyers and sellers.
D)Drivers with insurance who tend to drive more recklessly.

Question

Quizplus · Accepted Answer

Adverse selection refers to a situation where one party in a transaction has more or better information than the other, often leading to an imbalance that affects the transaction's outcome. Choice C, the imbalance of information between used car buyers and sellers, is a classic example of adverse selection, where sellers have more information about the car's condition than buyers. This can lead to a market where only lower-quality goods are sold (the "lemons" problem).

Which of the Following Is a Classic Example of Adverse