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Which of the Following Is Not True of Adverse Selection

Question 77

Multiple Choice

Which of the following is not true of adverse selection?


A) It can result when one of the parties in a transaction has little information about the quality of the goods involved.
B) It can cause the quality of the goods traded to decline if quality detection costs are high.
C) It can be a difficult problem to overcome because it is not individually rational for the party with more information to provide a truthful and complete disclosure.
D) It occurs in the used-car market but not in the market for insurance.
E) It drives out the high-quality products and only the low-quality products are left in a market.

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