Which of the following markets is subject to adverse selection?
A)The used car market
B)The insurance market
C)The financial market
D)All of these markets are subject to adverse selection.

Question

Quizplus · Accepted Answer

All of these markets are subject to adverse selection because in each case, one party has more or better information than the other, leading to potential mismatches in transactions. In the used car market, sellers may know more about the car's condition than buyers. In the insurance market, individuals may have more information about their health or risk levels than insurers. In financial markets, borrowers may have more information about their repayment capacity than lenders.

Which of the Following Markets Is Subject to Adverse Selection