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 fewer safety devices
C)Individuals living in less secure neighborhoods want to buy more 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 fewer safety devices
C)Individuals living in less secure neighborhoods want to buy more insurance
D)​Individuals with a strong family history of heart diseases opt to buy less insurance

Quizplus · Accepted Answer

Adverse selection occurs when there is asymmetric information between buyers and sellers, leading to high-risk individuals being more likely to purchase insurance. In this case, individuals in less secure neighborhoods are more likely to buy insurance due to their higher risk.

​The Following Is an Example of Adverse Selection

The Following Is an Example of Adverse Selection