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Market Failure: Information Asymmetry/Adverse Selection

APMICR-VOH2LJ

Which of the following represents the market failure of adverse selection?

A

Consumers often fail to get whooping cough vaccinations because they do not consider the benefits that these vaccinations provide to others.

B

Members of a community benefit when the police arrest criminals, regardless of whether or not they contribute to the cost of law enforcement.

C

There were significant gas shortages in the 1970s as a result of the freeze on price increases imposed by President Nixon.

D

Insurance companies may be reluctant to sell health insurance because they fear that only individuals with illnesses will buy it.

E

Insurance companies do not sell divorce insurance because customers who purchase it may become more likely to get a divorce as a result of the insurance benefits.