What is adverse selection? It refers to the private, self-interested actions people that people pursue, which when taken collectively leads to a loss A in economic surplus. It refers to the actions people take after they have entered into a transaction that make the other party to the B transaction worse off. It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction It refers to the actions people take before they enter into a transaction so as to mislead the other party to the D transaction