Adverse selection arises when:
A)the wants of both parties are aligned with one another.
B)buyers and sellers have different information about the quality of a good or the riskiness of a situation.
C)buyers and sellers with the same information about the quality of a good or the riskiness of a situation seek each other out.
D)people engage in riskier behaviors because they have incomplete information.

Question

Quizplus · Accepted Answer

Adverse selection occurs when there is an asymmetry of information between buyers and sellers, leading one party to be at a disadvantage because they have less information about the quality of a good or the riskiness of a situation than the other party.

Adverse Selection Arises When