The classic example of adverse selection is the market for:
A)oranges
B)child safety equipment
C)used cars
D)crime novels

Question

Quizplus · Accepted Answer

Adverse selection refers to a situation where one party in a transaction has more information than the other about the quality of the product. In the used car market, sellers may have better information about the condition of their cars than buyers, creating a situation where buyers are more likely to purchase inferior products at a higher than market price. This is because sellers with a quality product are less likely to sell while sellers of inferior products are more likely to be eager to offload them at a high price.

The Classic Example of Adverse Selection Is the Market For