Which situation best illustrates adverse selection?

CA Foundation · Business Economics · MTP · January 2026
Which situation best illustrates adverse selection?
(A) A. Insured driver drives rashly
(B) B. Seller hides product defects before sale
(C) C. Consumer overuses subsidised healthcare
(D) D. Government fixes minimum prices

Suggested Answer and Working Notes:

Correct Answer: Option (B)

B. Seller hides product defects before sale

Topics: Public Finance

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