Adverse selection is most likely to be a problem when:
A) one side of the market, either buyer or seller, has better information than the other side.
B) there are public goods involved.
C) the good being exchanged has negative externalities.
D) the good being exchanged has free rider problems.

Question

Quizplus · Accepted Answer

Adverse selection occurs when one party in a transaction has more or better information than the other, typically leading to the party with less information making suboptimal decisions.

Adverse Selection Is Most Likely to Be a Problem When