In the market for newly developed real estate,adverse selection could occur when
A)The buyers can observe and detect all the features of the properties
B)The buyers know more about the property than the developers
C)The developers of the property know more about the properties than the buyers
D)Neither parties knows about the item properly

Question

​In the market for newly developed real estate,adverse selection could occur when
A)​The buyers can observe and detect all the features of the properties
B)The buyers know more about the property than the developers
C)The developers of the property know more about the properties than the buyers
D)​Neither parties knows about the item properly

Quizplus · Accepted Answer

Adverse selection occurs when one party possesses more information about the transaction than the other party. In the case of newly developed real estate, the developers are likely to have more information about the properties than the buyers, especially if the buyers are unable to observe or detect all the features of the properties. This information asymmetry can lead to adverse selection, with buyers potentially making a poor choice due to their lack of knowledge about the property. Thus, choice C is the best answer.

​In the Market for Newly Developed Real Estate,adverse Selection Could

In the Market for Newly Developed Real Estate,adverse Selection Could