When Government Mandates Participation in a Program to Solve an Information

question 46

Multiple Choice

When government mandates participation in a program to solve an information asymmetry problem,it is trying to prevent:

• A) moral hazard.
• B) adverse selection.
• C) building a reputation.
• D) illegal screening.

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Definitions:

Marginal Cost

The financial outlay involved in producing an additional unit of a product or service.

Resources

The total means available for economic and political development, such as minerals, labor, and capital.

Pareto Optimal

A situation in economics where resources are allocated in the most efficient manner, making it impossible to reallocate without making at least one individual worse off.

Trades

The action of buying and selling goods and services, which can occur domestically within a country or internationally between countries.