- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics
- Reading 12. Economics of Regulation
- Subject 1. Overview of Regulation
CFA Practice Question
An example of adverse selection is when sellers have information about some aspect of product quality, but buyers don't. Adverse selection is an example of:
A. informational frictions.
B. positive externalities.
C. negative externalities.
Explanation: Adverse selection: private information in the hands of SOME, but NOT ALL, market participants, which affects the consumption of goods or services.
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