Steve is planning to sell his home.In preparation for the sale,he paints all of the ceilings in his house to cover up water stains from his leaking roof so that potential buyers will be unaware of this problem.This is an example of
A) moral hazard.
B) screening.
C) adverse selection.
D) the principal-agent problem.

Question

Quizplus · Accepted Answer

This is an example of adverse selection, where the seller has more information about the property's condition than the buyer, potentially leading to a transaction where the buyer is unaware of hidden defects.

Steve Is Planning to Sell His Home