Frequently It Is the Case That: (1) a Worker Knows

question 23

Multiple Choice

Frequently it is the case that: (1) A worker knows more than his employer about how much effort he puts into his job, and (2) the seller of a used car knows more than the buyer about the car's condition.

• A)Neither (1) nor (2) serves as an example of asymmetric information.
• B)Both (1) and (2) serve as examples of asymmetric information.
• C)Neither (1) nor (2) serves as an example of a hidden action.
• D)Both (1) and (2) serve as examples of hidden action.

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Definitions:

Offer

A proposal by one party to enter into a contract, subject to acceptable terms by another party.

Standard Form Contract

A pre-prepared contract where most terms are set in advance with little or no negotiation between the parties, often used in routine transactions.

Legal Relationship

A connection between entities or individuals that is recognized and enforceable by law.

Radio

A radio is a technology that uses radio waves to transmit information, such as sound, by systematically modulating properties of electromagnetic energy waves transmitted through space.