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:

Partial Ownership

Holding a fraction or a portion of the total stake or equity in a property, company, or financial asset.

Real Property

Refers to land and anything permanently attached to the land, like buildings and structures.

Stock Investments

The act of putting money into financial schemes, shares, property, or a commercial venture with the expectation of achieving a profit, particularly through the purchase of equity securities in companies.

Tangible

Capable of being touched or felt; having physical substance.