Adverse selection exists because ________.

Name: Adverse selection exists because ________.
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Question

Quizplus · Accepted Answer

Adverse selection occurs due to a situation of asymmetric information, where one party has more information than the other. In this case, the informed party may select the unfavorable options, leading to adverse selection. Moral hazard, government regulation, and financial innovation may have impacts on the market, but they do not directly cause adverse selection.

Adverse Selection Exists Because ________