When the Buyer Knows Less Than the Seller About the Characteristics

question 70

Multiple Choice

When the buyer knows less than the seller about the characteristics of the good being sold, there is

• A)a principal-agent problem.
• B)a moral hazard problem.
• C)an adverse selection problem.
• D)a signaling problem.

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Definitions:

Legal Formalities

The required procedures or steps mandated by law for ensuring that legal acts or documents are valid and enforceable.

Officers

Individuals appointed or elected to oversee the management and daily operations of a corporation or other entity, typically holding positions such as CEO, CFO, or President.

Corporation

A legal entity that is separate and distinct from its owners, capable of owning property, entering into contracts, and being sued.

Shareholders

Owners of shares in a corporation, thereby having an interest in the corporation's operations and earnings.