An example of a market subject to adverse selection would be:
A)the used car market.
B)the auto repair market.
C)the appliance market.
D)All of these are markets subject to adverse selection.

Question

Quizplus · Accepted Answer

Adverse selection occurs when one party in a transaction has more information than the other party, leading to a potential imbalance of power and potentially negative outcomes for the party with less information. In the used car market, sellers often have more information about the car's history and condition than buyers, leading to the possibility of buyers purchasing cars that are of lower quality or have hidden issues. This information asymmetry can also result in higher prices for buyers, as they are willing to pay more for cars that appear to be of higher quality. Therefore, the used car market is a prime example of a market subject to adverse selection.

An Example of a Market Subject to Adverse Selection Would