A Situation in Which One Side of the Market Has

question 14

Multiple Choice

A situation in which one side of the market has more reliable information than the other side is called _____

• A) asymmetric information.
• B) moral hazard.
• C) adverse selection.
• D) free-riding.
• E) liquidity.

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Definitions:

Implicit Costs

The opportunity costs that are not directly incurred but represent the loss of alternative benefits when choosing one option over another.

Explicit Costs

Direct, out-of-pocket payments for goods and services required to run a business.

Accounting Profit

Sales minus explicit cost. Implicit costs are not considered.

Perfect Competition

A market structure characterized by many buyers and sellers, homogeneous products, free entry and exit, and perfect information, where no single entity can influence market prices.