An Approach That Can Be Taken by Someone Directly Involved

question 40

Multiple Choice

An approach that can be taken by someone directly involved in a transaction to solve the problems caused by information asymmetry is:

• A) proofing.
• B) building a reputation.
• C) disclosure laws.
• D) mandating that information be shared.

---

Definitions:

Marginal Revenue

The gain in revenue resulting from the sale of one extra unit of a good or service.

Marginal Cost

The price of making an additional unit of a product or service.

Perfect Competition

A market setup where numerous buyers and sellers interact, offering identical products, with no barriers to entry or exit, and complete transparency of information, resulting in suppliers having no control over prices.

Monopoly

A market structure characterized by a single seller, selling a unique product in the market. This seller faces no competition, as he is the sole seller of goods with no close substitute.