AP® Microeconomics

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Market Failure: Information Asymmetry/Adverse Selection


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


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


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


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


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


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.