Suppose a firm offers its workers a health insurance plan in which it allows workers to allocate a set amount of money toward specific types of insurance.Mary,who has five children needing braces,selects family dental coverage.This is an example of the

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Mary's decision to select family dental coverage specifically for her five children needing braces is an example of adverse selection, as she is choosing a coverage option that is specifically tailored to her family's needs instead of opting for a more general coverage option that would spread the risk across a larger pool of individuals. This can lead to higher costs for the insurance provider, as they are taking on more risk by insuring individuals who are more likely to require expensive care.

Suppose a Firm Offers Its Workers a Health Insurance Plan