Question

In which of the following cases is there an adverse selection problem? Select all that apply. a. A health insurance market, in which the insurers do not know whether or not the applicants for insurance are habitual smokers. b. A motor insurance market, in which the insurers do not know how carefully the insured people drive. c. Online sales of nutritional supplements, when consumers cannot tell whether their contents are as claimed by sellers. d. A firm that employs home-workers, but cannot observe how hard they are working.

Answer 1

Answer:

C. Online sales of nutritional supplements, when consumers cannot tell whether their contents are as claimed by sellers.

Explanation:

Online sales of nutritional supplements, when consumers cannot tell whether their contents are as claimed by sellers is an adverse selection problem.