question will be sent to your instructor for grading. Read the scenarios in the following table and, for each one, determine whether it illustrates a problem of adverse selection or moral hazard. Write your answer in the last column. B Scenario Adverse Selection or Moral Hazard? ok ht nces Carl buys a used car. The seller tells him the car is "like new with a new transmission. A month after he buys the car, the transmission fails. The mechanic says it is old and needs to be replaced. Jackson plans an expensive dinner for his girlfriend and orders a bottle of gourmet wine. The restaurant charges him the gourmet price but substitutes a much cheaper bottle of wine without him knowing it. After June purchases homeowners insurance, she decides to get rid of the home security system that requires a monthly maintenance fee. Pat decides to purchase the additional coverage offered when he buys a new smartphone because he knows that he is not very careful and is likely to damage the device. Gopal is searching for a bond investment and cannot tell which borrowers are good or bad credit risks. He settles on requiring a risk premium equal to at least the average risk. He ends up with a high-risk borrower. ABC, Inc. is a large financial institution. Managers know that, if the institution fails, it will destroy the financial system. They take on more risk, as a result. 8 of 40 HP 81F Smoke D ENG