Which of the Following Is an Example of an Asymmetric

question 17

Multiple Choice

Which of the following is an example of an asymmetric information problem?

• A)A corporation releases toxic wastes into a river.
• B)A corporation relocates to Ireland to take advantage of lower corporate tax rates.
• C)A stock analyst rates a stock higher than it deserves because the securities firm she works for wants to obtain business from the corporation that issued the stock.
• D)A corporation manipulates its financial information to avoid disclosing a large loss from its operations in China.

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Definitions:

Ethical Situation

A scenario or circumstance that requires individuals or organizations to choose between alternatives that must be evaluated as right or wrong.

Historical Cost Principle

An accounting principle that states assets should be recorded and reported at their original purchase cost and not adjusted for changes in market value.

Appraisal Value

The assessed value of an asset, typically real estate or a business, determined by a professional appraiser based on the property's condition, market trend, and comparable sales.

Market Price

The present rate at which a service or asset is available for purchase or sale in the market.