The result of adverse selection is that the presence of high-quality goods in the market drive low-quality goods out of the market.

Question

Quizplus · Accepted Answer

The result of adverse selection is that low-quality goods tend to drive high-quality goods out of the market. This is because buyers can only observe the price of the good, so they struggle to distinguish between high and low-quality goods. This means that sellers of high-quality goods may leave the market as buyers are unwilling to pay a higher price for a good that looks the same as a cheaper, lower quality alternative.

The Result of Adverse Selection Is That the Presence of High-Quality