(Answered) Adverse selection is aGroup of answer choicesPre-contractual problemPost contractual problemPost…

➤ How does adverse selection affect insurance and credit markets?
In insurance and credit, adverse selection raises average risk and pushes up prices. Riskier individuals buy more coverage or seek loans, while low-risk people opt out. Insurers and lenders respond with higher premiums, tighter underwriting, or denials, which can reduce participation and efficiency unless firms use risk classification and targeted pricing.