What Can We Say About the Problem of Asymmetric Information

question 19

Multiple Choice

What can we say about the problem of asymmetric information

• A)It always arises from government intervention in private markets.
• B)It serves as a possible rationale for government intervention in private markets.
• C)It always amounts to a moral hazard problem.
• D)It does not affect prices consumers are willing to pay in the market.

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Definitions:

Drive-Reduction

A theory of motivation that posits the reduction of physiological needs drives behavior towards achieving homeostasis.

Arousal Approach

a theory in psychology that focuses on how arousal levels affect performance, suggesting an optimal level of arousal for peak performance depending on the task complexity.

William McDougall

A psychologist known for his work on instinct theory and social psychology, advocating for the inclusion of innate tendencies in explaining behavior.

Human Instincts

Innate, biologically determined behaviors that are present at birth, driving individuals towards certain actions or responses without the need for learning, such as the instinct for survival.