Adverse selection is the process by which
A)"undesirable" members of a particular market are more likely to participate in exchange.
B)"undesirable" members of a particular market are less likely to participate in exchange.
C)adversaries communicate negative messages.
D)full-disclosure becomes impossible.

Question

Quizplus · Accepted Answer

Adverse selection occurs when "undesirable" members of a particular market, such as those with higher risk levels, are more likely to participate in an exchange due to the asymmetry of information between the buyer and seller. This can lead to imbalanced transactions and loss for the less informed party.

Adverse Selection Is the Process by Which