An example of adverse selection is the situation where someone chooses a car that is not as good as it is claimed to be.

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Adverse selection refers to a situation where one party in a transaction has more or better information than the other party, typically leading to a poor outcome for the less informed party. The example given is more accurately described as a case of information asymmetry or possibly a lemon problem, but not adverse selection, which is more about the selection process before a transaction, often seen in insurance markets where individuals with higher risk are more likely to purchase insurance.

An Example of Adverse Selection Is the Situation Where Someone