A consequence of adverse selection is:
A)buyers gain surplus they would have lost with complete information.
B)sellers gain surplus they would have lost with complete information.
C)transactions do not take place that would have been possible if the parties had the same information.
D)All of these statements are true.

Question

Quizplus · Accepted Answer

Adverse selection refers to the situation in which one party in a transaction has more information than the other, leading to a higher likelihood of selecting options that are unfavorable to the other party. As a consequence, transactions that may have taken place if both parties had full information may not occur, resulting in a loss for both parties. Therefore, the best choice is C. A and B are not necessarily true consequences of adverse selection.

A Consequence of Adverse Selection Is