When Information Asymmetry Exists in a Market, the Government

question 57

Multiple Choice

When information asymmetry exists in a market, the government:

• A)always steps in to try to correct it.
• B)never steps in to try to correct it.
• C)sometimes steps in to try to correct it.
• D)only steps in to correct it if complete information can be ensured.

---

Definitions:

Demand Curve

A graph showing the relationship between the price of a good or service and the quantity demanded by consumers, holding all other factors affecting demand constant.

Nash Equilibrium

A situation in a non-cooperative game where each player's strategy is optimal given the strategies of the other players, and no unilateral deviation can be beneficial.

Cartel Output

The total level of production agreed upon by members of a cartel, who coordinate their pricing and output to maximize collective profits.

Jointly Maximize Profits

A strategy where firms coordinate their actions to increase their collective profits rather than competing with one another.