The Problem Created by Asymmetric Information Before the Transaction Occurs

question 118

Multiple Choice

The problem created by asymmetric information before the transaction occurs is called ________,while the problem created after the transaction occurs is called ________.

• A)adverse selection;moral hazard
• B)moral hazard;adverse selection
• C)costly state verification;free-riding
• D)free-riding;costly state verification

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Definitions:

Sense Of Security

A feeling of safety and stability that comes from believing that one is protected from harm and risk.

Grapevine

Transfers information through networks of friendships and acquaintances.

Ethnocentrism

The tendency to believe one’s culture and its values are superior to those of others.

Alternative Points

Perspectives or options that differ from the main or currently considered paths, often providing creative or novel solutions to problems.