One difference between moral hazard and adverse selection is
A)Moral hazard has to do with unobservable characteristics of individuals
B)Adverse selection has to do with unobservable actions of individuals
C)Adverse selection is when individuals change their behaviors because of a contract
D)Adverse selection is when you choose the wrong answer on a test

Question

​One difference between moral hazard and adverse selection is
A)​Moral hazard has to do with unobservable characteristics of individuals
B)Adverse selection has to do with unobservable actions of individuals
C)Adverse selection is when individuals change their behaviors because of a contract
D)​Adverse selection is when you choose the wrong answer on a test

Quizplus · Accepted Answer

Adverse selection refers to a situation where one party in a transaction has more information than the other, particularly about unobservable characteristics, leading to a selection of undesirable risks. This is in contrast to moral hazard, which involves changes in behavior after a transaction has occurred.

​One Difference Between Moral Hazard and Adverse Selection Is

One Difference Between Moral Hazard and Adverse Selection Is