Suppose you hear of a great deal on a used car and wonder,"Why is the price so low?" This might be an instance of ________.

Question

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Adverse selection is the situation when one party in a transaction has better information or knowledge compared to the other party, resulting in a higher risk of a bad outcome or loss for the latter party. In this case, the low price of the used car may be an indication of some hidden flaws or problems that the seller knows but the buyer doesn't, creating a higher risk of a bad purchase for the buyer. As a result, the buyer may be hesitant to buy the car or may demand a lower price, leading to a market failure due to information asymmetry.

Suppose You Hear of a Great Deal on a Used