Which of the Following Relationships Involves Asymmetric Information

question 43

Multiple Choice

Which of the following relationships involves asymmetric information?

• A) An employee knows more than his employer knows about his work effort.
• B) A borrower knows more than the lender about his ability to repay the loan.
• C) The seller of a 30-year-old house knows more than the buyer about the condition of the house.
• D) All of the above are correct.

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Definitions:

Interpersonal Communication

The process of exchange of information, feelings, and meaning between two or more people through verbal and/or non-verbal methods.

Self-Correcting Mechanism

A process through which a system naturally adjusts and corrects its course without external intervention, aiming to maintain equilibrium or improve function.

Probability

The measure of the likelihood that an event will occur, quantified as a number between 0 and 1.

Grapevine

An informal communication network within an organization, characterized by personal conversations and exchanges of information beyond official channels.