Instead of Referring to a Sample of Comments a Doctor

question 28

Multiple Choice

Instead of referring to a sample of comments a doctor has provided on his own website,Catrina has decided instead to rely on reviews from friends who have been his patients.What type of asymmetric information problem is Catrina trying to correct by soliciting comments from friends?

• A) diminishing returns
• B) adverse selection
• C) moral hazard
• D) principal-agent problem
• E) an adverse selection problem that became a principal-agent problem

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Definitions:

Dividend Yield

The dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

Par Value

The face value of a bond or the stock value stated in the corporate charter.

Common Stock

A type of equity ownership in a corporation, representing a claim on a portion of the company's profits and assets.

Market Value

The current price at which an asset or service can be bought or sold, determined by the supply and demand dynamics in the open market.