Which of the Following Statements Is False

question 30

Multiple Choice

Which of the following statements is false ?

• A)Asymmetric information can exist both before and after a transaction takes place.
• B)Moral hazard occurs when one party to a transaction changes his or her behavior in a way that is hidden from and costly to the other party.
• C)Adverse selection has the potential to eliminate some markets.
• D)Asymmetric information only exists after a transaction takes place.

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Definitions:

Holder in Due Course

A legal term for a person who has acquired a negotiable instrument in good faith and for value, thereby having certain protections.

Fixed Amount Requirement

A stipulation that requires a specific, predetermined amount of money to be paid or received in a transaction or contract.

Negotiable Instruments

Written documents guaranteeing the payment of a specific amount of money, either on demand or at a set time, with the payer's name written on it.

Promissory Note

A financial instrument in which one party promises in writing to pay a determinate sum of money to the other, either at a fixed or determinable future time or on demand of the payee, under specific terms.