All of the Following Statements About Asymmetric Information Are True

question 49

Multiple Choice

All of the following statements about asymmetric information are true EXCEPT:

• A) Asymmetric information occurs when one party to a transaction has relevant information to the transaction that the other party does not have.
• B) Asymmetric information creates market failures because it makes it harder for individuals to engage in transactions that would take place in the presence of perfect information.
• C) Asymmetric information can only be solved through government intervention.
• D) Asymmetric information occurs in the market for used cars and in the insurance market.

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Definitions:

Dominant Strategy

In game theory, a strategy that is best for a player in a game regardless of the strategies chosen by the other players.

Pricing Strategy

A plan or method implemented by a company to price its products or services to attract consumers while maximizing profit.

Cable TV Market

The sector of the television industry where television services are provided to consumers via coaxial or fiber-optic cables.

Tit-For-Tat Strategy

A strategy in repeated games where a player responds in kind to an opponent’s previous action, starting cooperatively and then mirroring the opponent’s behavior.