In the market for insurance, the adverse selection problem leads

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Adverse selection occurs when those who are most likely to collect on insurance (such as high-risk individuals) are also the most likely to purchase it, while low-risk individuals might opt out of purchasing insurance. This can lead to higher premiums for everyone since the insurance pool is now riskier, and can also lead to insurance companies not offering policies at all due to the higher risk.

In the Market for Insurance, the Adverse Selection Problem Leads