In Markets with Asymmetric Information

question 144

Multiple Choice

In markets with asymmetric information,

• A)moral hazard causes adverse selection which in turn causes asymmetric information.
• B)adverse selection causes moral hazard which in turn causes asymmetric information.
• C)asymmetric information causes moral hazard and then it causes adverse selection.
• D)asymmetric information causes adverse selection and then it causes moral hazard.

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Definitions:

Opportunity Cost

The cost of forgoing the next best alternative when making a decision or choosing one option over another.

Self-Employed Lawyer

A legal professional who operates their own legal practice rather than working as an employee for a law firm or corporation.

Varies

Describes how something changes or differs across different situations, locations, or points in time.

Time

A continuum that lacks spatial dimensions and in which events occur in apparently irreversible succession from the past, through the present, into the future.