When Asymmetric Information Problems Drive High Quality Products from a Market

question 88

Multiple Choice

When asymmetric information problems drive high quality products from a market, we refer to this situation as:

• A) adverse selection.
• B) moral hazard.
• C) a lemons problem.
• D) A and C are correct.
• E) B and C are correct.

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Definitions:

Opportunity Cost

Opportunity cost represents the value of the best alternative forgone when a decision is made to choose one option over another.

Bushel

A measure of volume that is used primarily for agricultural crops, with the exact measurement differing by product.

Bananas

A type of elongated, edible fruit produced by several kinds of large herbaceous flowering plants in the genus Musa.

Comparative Advantage

The ability of a country or firm to produce a particular good or service more efficiently than other goods or services, relative to other countries or firms.