Question

What do you mean by moral hazard and adverse selection? How do they lead to the market failure?

Answer 1

Answer:

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Explanation:

A moral hazard can occur when the actions of one party may change to the detriment of another after a financial transaction. ... A lack of equal information causes economic imbalances that result in adverse selection and moral hazards. All of these economic weaknesses have the potential to lead to market failure.

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