Adverse selection is said to exist when an individual
A)is not able to take advantage of another individual.
B)has the incentive to,and is able to,shift costs to another individual.
C)selects a product which has adverse externalities.
D)purchases a lot of insurance because he/she knows that he/she is at high risk.
E)is averse to certain products.

Question

Quizplus · Accepted Answer

Adverse selection refers to situations where individuals with a higher risk of loss or damage are more likely to purchase insurance. Option D is the only choice that refers to this concept, making it the best choice.

Adverse Selection Is Said to Exist When an Individual