A market can experience:

Question

Quizplus · Accepted Answer

All of these statements are true because a market can indeed experience moral hazard without adverse selection, adverse selection without moral hazard, and both phenomena simultaneously. Moral hazard occurs when one party takes on more risk because they know the other party bears the cost of those risks, while adverse selection happens when there is asymmetric information between buyers and sellers, leading to the selection of poorer-quality goods or risks. These can occur independently or together in various markets.

A Market Can Experience