Two Consequences of Asymmetric Information Are Adverse Selection and Moral

question 53

Multiple Choice

Two consequences of asymmetric information are adverse selection and moral hazard.An important distinction between the two is

• A)adverse selection exists prior to the completion of a transaction while moral hazard occurs after the transaction is completed.
• B)moral hazard exists prior to the completion of a transaction while adverse selection occurs after the transaction is completed.
• C)adverse selection leads to an inefficient quantity while moral hazard leads to an efficient quantity.
• D)moral hazard leads to an inefficient quantity while adverse selection leads to an efficient quantity.

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Definitions:

Official Possession

The state of legally holding or owning something recognized by government or authoritative bodies.

Anti-insurgent Policies

Strategies and actions taken by a government to prevent, counteract, or quell activities considered rebellious or against the state's control, often in a military or strategic context.

Valeriano Weyler

A Spanish general who served as the Governor General of Cuba and was known for his repressive tactics against Cuban insurgents during the Cuban War of Independence.

Springfield

A city name in the United States, notable for historical events depending on the specific state.