Which of the following illustrates adverse selection?
A)Individuals sometimes mistakenly buy defective cameras.
B)Individuals will not search for bargains for low cost items.
C)Individuals know a lot about their family health history when they buy insurance.
D)Individuals can choose whether to drive safely or not.

Question

Quizplus · Accepted Answer

Adverse selection occurs when individuals with higher risk or adverse characteristics are more likely to purchase insurance compared to individuals with lower risk. In this case, individuals who know a lot about their family health history (which may indicate higher risk for certain health conditions) are more likely to purchase insurance, resulting in adverse selection. The other choices (A, B, and D) do not necessarily involve adverse selection.

Which of the Following Illustrates Adverse Selection