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Dana goes to a furniture store to purchase a couch for her new home. A salesperson at the store shows her the best pieces but is unable to make a sale. Although Dana confesses that she likes the color and the design of the various couches, they do not seem to be ergonomically efficient. Which of the following objections is exemplified in this scenario?
Adverse Selection
A situation in which one party in a transaction has more information than the other, often leading to an imbalance in a market or poor decision-making outcomes.
Moral Hazard
A situation where one party engages in risky behavior knowing that they are protected from the consequences by another party.
Adverse Selection
A situation where asymmetric information results in high-risk individuals being more likely to select into or remain in a contract designed for low-risk individuals, affecting insurance markets and other transactional relationships.
Asymmetric Information
A situation in which one party to a transaction has more or superior information compared to another.
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