Final answer:
Adverse selection in economics involves buyers and sellers with differing information levels, leading to negative market outcomes due to information imbalances.
Explanation:
Adverse selection is a term used in economics to describe situations where buyers and sellers possess varying levels of information, leading to undesirable outcomes in markets due to asymmetric information. This can result in the selection of inferior products or services. For instance, in insurance markets, adverse selection occurs when high-risk individuals dominate the pool of insured clients, driving up costs for the insurer.
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