When does the problem of adverse selection arise in any ...

[wenmo]

When does the problem of adverse selection arise in any market?

Question 2

The CEO and stockholders are not necessarily the same people. This gives rise to
 A) upstream and downstream contracts.
  B) a principal-agent problem.
  C) complete contracts.
  D) a control over moral hazard.

[allisonblackmore]

Answer to Question 1

The problem of adverse selection becomes prominent when a seller is unable to obtain reliable information from a number of buyers. In insurance, adverse selection can happen if high-risk persons insure themselves more heavily than low-risk persons.

Answer to Question 2

B

[wenmo]

Thanks for the timely response, appreciate it

[bitingbit]

Gracias!