An Example of an Adverse Selection Problem Is in Insurance

question 52

True/False

An example of an adverse selection problem is in insurance, where the people most likely to claim
insurance payouts are the people who will seek to buy the most generous policies.

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Definitions:

Lost Wax

A method of metal casting in which a molten metal is poured into a mold that has been created using a wax model, which is then melted away and lost.

Repoussé

Formed in relief by beating a metal plate from the back, leaving the impression on the face. The metal sheet is hammered into a hollow mold of wood or some other pliable material and finished with a graver. See also Relief.

Drilling

The process of making holes in a solid substrate by using a rotating tool called a drill, often used in construction, manufacturing, and resource extraction.

Price Discrimination

The business practice of selling the same good at different prices to different customers.