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.

---

Definitions:

Raw Materials

Basic materials that are used in the production process of manufacturing goods, prior to being transformed into finished products.

Manufacturing Operations

All activities related to the production of goods, from raw material procurement to final product delivery.

Raw Materials Used

The basic materials consumed in the production process, not including labor or manufacturing overhead.

Factory Overhead Costs

Factory overhead costs are indirect expenses related to manufacturing, such as utilities, maintenance, and property taxes for the production facility.