The following is an example of adverse selection
A)A majority of those applying for well paid jobs are well qualified
B)More reckless drivers opt for cars with more safety devices
C)Individuals living in less secure neighborhoods want to buy less insurance
D)Individuals with a strong family history of heart diseases opt to buy less insurance

Question

The following is an example of adverse selection​
A)​A majority of those applying for well paid jobs are well qualified
B)More reckless drivers opt for cars with more safety devices
C)Individuals living in less secure neighborhoods want to buy less insurance
D)​Individuals with a strong family history of heart diseases opt to buy less insurance

Quizplus · Accepted Answer

Adverse selection occurs when those with higher risk are more likely to purchase or seek out insurance. In this case, more reckless drivers (higher risk) are choosing to opt for cars with more safety devices (insurance), which could lead to higher costs for insurers.

The Following Is an Example of Adverse Selection​

The Following Is an Example of Adverse Selection