The presence of adverse selection in a market causes:
A)some transactions to fail to take place.
B)a deadweight loss.
C)market failure.
D)All of these are true.

Question

Quizplus · Accepted Answer

Adverse selection can lead to market inefficiencies where some transactions fail to occur, creating a deadweight loss and contributing to market failure. This is because adverse selection occurs when one party in a transaction has more or better information than the other, leading to poor market outcomes.

The Presence of Adverse Selection in a Market Causes