Which of the following is an effect of adverse selection?
A)Some transactions do not take place, which would have occurred with complete information.
B)Too many transactions of low value occur.
C)Transactions that would not have occurred with complete information now occur.
D)None of these statements are true.

Question

Quizplus · Accepted Answer

Adverse selection occurs when one party in a transaction has more or better information than the other party, typically leading to a situation where transactions that would be mutually beneficial with complete information do not occur. This is because the less informed party seeks to protect themselves from potential negative outcomes, often leading to market inefficiencies.

Which of the Following Is an Effect of Adverse Selection