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:

Evolutionary Psychologist

A professional who studies the psychological adaptations of humans to the changing physical and social environment, particularly those that evolved to solve recurrent problems in human ancestral environments.

Gender Differences

The distinctions in characteristics, behaviors, and roles traditionally associated with being male or female in a society.

Cultural Arguments

Discussions or assertions that are based on the beliefs, values, practices, and norms of particular societies or groups.

Evolutionary Psychology

A theoretical approach in psychology that examines how evolutionary theory influences human thoughts, behaviors, and psychological traits.