​Adverse selection is a

A) ​Pre-contractual problem
B) Post contractual problem
C) Post firing problem
D) ​None of the above

Adverse selection is a pre-contractual problem that arises when one party has more information than the other party in a transaction. In insurance, for example, those who are more likely to make claims (i.e. those with pre-existing health conditions) are more likely to seek out and purchase insurance, leading to a disproportionate number of high-risk individuals in the insured pool. This can lead to higher premiums for everyone and can make it difficult for insurance companies to maintain profitability.