Adverse selection in the market for health insurance arises because

Question

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Adverse selection occurs when buyers of insurance have more information about their health risks than the insurance company. This leads to a situation where individuals who are more likely to use health insurance (i.e. are at higher risk of illness) are more likely to purchase insurance. This can result in higher costs for insurance companies, which may lead to higher premiums for everyone.

Adverse Selection in the Market for Health Insurance Arises Because