Which of the Following Is an Example of Asymmetric Information

question 14

Multiple Choice

Which of the following is an example of asymmetric information leading to a "lemons" market?

• A) A marketing manager is uncertainty about the volume of sales in the next quarter.
• B) An employee does not know the rate of inflation in the coming year and so cannot ascertain his real wage.
• C) The seller of a used laptop knows more about its true condition than the buyer.
• D) A firm's manager has motives that sometimes conflict with the interests of shareholders.
• E) A trader, who has access to inside information, profits by trading on that information.

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Definitions:

Socially Optimal

A condition or outcome that maximizes societal welfare, considering both efficiency and equity among members of society.

Marginal Cost

The spending required to create an additional unit of a good or service.

Marginal Revenue

The increase in revenue that results from selling one additional unit of a product or service, crucial for making decisions about production quantities and pricing.

Pure Monopoly

A market structure where a single seller completely dominates the market, facing no competition.