Which of the following is an example of adverse selection?
A) emplayees shirang because they beleve they can get awray with reduced wrark
B) a traveller who is prane to forgetting her bags purchasing full-camprehensive tavel insurance
C) a well-infarmed IT exquert purchasing a new laptop
D) apetal station displaying its prices alongside a busy highway

Question

Quizplus · Accepted Answer

Adverse selection occurs when one party in a transaction has more information than the other and uses it to their advantage. In this case, the traveler is purchasing full-comprehensive travel insurance because she knows she is forgetful and more likely to lose her bags, while the insurance company does not have this information and is therefore more likely to incur a loss on this transaction.

Which of the Following Is an Example of Adverse Selection