Question

Adverse selection Multiple Choice is always present when moral hazard arises relates to unobserved characteristics of people or goods and occurs before the parties have entered into an agreement All of these statements are true is about actions and occurs after the parties have voluntarily entered into an agreement < Prev 6 of 55 Next > 0 16 Gateway

Answer 1

Adverse selection is a market process which is occur in those transactions where asymmetry of information is present means where one party has more or better information about any product , deal or insurance than other party.
So according to the question :-

Option 1 - incorrect
Because in most situations which is not about insurance , legal liabilities and renting services , moral hazard unlikely to occur , but in any good whose value is determined after using it , adverse selection is there.

Option 2 - correct
Adverse selection is a process which occurs through asymmetry of information and knowledge before agreement

Option 3 - incorrect
Because 1st and 4th option is incorrect

Option 4 - incorrect
Adverse selection is a process which occurs through asymmetry of information and knowledge before agreement not after the agreement