Principal-Agent Problems Arise From

question 27

Multiple Choice

Principal-agent problems arise from:

• A) asymmetric information.
• B) hyperbolic discounting.
• C) risk aversion.
• D) deadweight losses.

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Definitions:

Lemons

In economic terms, refers to the problem of asymmetric information regarding the quality of products, especially used goods that are subpar or defective.

Peaches

Refers to the sweet, juicy fruit from the Prunus persica tree, often consumed fresh, canned, or used in culinary preparations.

Adverse Selection

A phenomenon in markets where buyers or sellers have information that one party to a transaction does not have, leading to an inefficient allocation of resources.

Adverse Selection

Adverse selection refers to a situation where buyers and sellers have different information, leading to transactions where the buyer or seller is at a disadvantage.