In the case of insurance, _______________ arises because the buyers of insurance have more information about _____________________than the insurance company does.
A) moral hazard; their risk rating
B) actuarial prices; their high-risk or low-risk status
C) adverse selection; the risk group they belong to
D) fundamental laws; actuarial fairness

Question

Quizplus · Accepted Answer

Adverse selection occurs in insurance when buyers have more information about the risk group they belong to than the insurance company, leading to a situation where those most likely to claim insurance are the ones most likely to purchase it.

In the Case of Insurance, _______________ Arises Because the Buyers