Two Key Consequences of Asymmetric Information Are Adverse Selection and Moral

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The Answer is Adverse selection is the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.Moral hazard refers to the actions people take after they enter into a transaction that make the other party to the transaction worse off.An important difference between the two is that adverse selection refers to what happens at the time of entering into a transaction (for example,a reckless driver buys automobile insurance)while moral hazard refers to what happens after entering into the transaction (for example,the insured driver drives his car off a highway and into a tree).

Two Key Consequences of Asymmetric Information Are Adverse Selection and Moral

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