Suppose Some Members of Enron's Board of Directors Are Aware

question 60

Multiple Choice

Suppose some members of Enron's board of directors are aware of the company's true financial condition, information that is not available to most investors. This is an example of

• A)lemon problem.
• B)moral hazard.
• C)adverse selection.
• D)asymmetric information.

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Definitions:

Emotional Distress

A legal term describing significant mental suffering or anguish that arises from an incident caused intentionally or by negligence.

Injurious Falsehood

A false statement made maliciously that causes actual damage to a person's business or property.

Trade Secret

Information, including a formula, practice, process, design, instrument, pattern, or compilation of information, that is not generally known and that a business can keep confidential to gain an economic advantage over competitors or customers.

Transferee

A person or entity that receives a transfer of property, rights, or interest from another.