The presence of adverse selection in a market causes:
A)some transactions fail to take place.
B)a loss of surplus.
C)market failure.
D)All of these statements are true.

Question

Quizplus · Accepted Answer

Adverse selection leads to a situation where there is an information asymmetry between buyers and sellers, leading to some transactions failing to take place, a loss of surplus, and therefore resulting in market failure. Hence, all statements are true.

The Presence of Adverse Selection in a Market Causes