When Consumers Possess Imperfect Information or Misinformation

question 15

Multiple Choice

When consumers possess imperfect information or misinformation:

• A) there is a role for the government to intervene and mandate better outcomes.
• B) firms have an incentive to reduce the information asymmetry in the market.
• C) industry associations that have better information should regulate the market.
• D) competitive efficiency is achieved as long as the market is unregulated.
• E) less-efficient products will be driven out of the market.

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Definitions:

Bond Buyer

An individual or entity that purchases bonds as a form of investment, looking to earn interest over time.

Risk

The exposure to the chance of loss or damage.

Financial Institutions

Organizations that provide financial services, including banks, credit unions, insurance companies, and investment firms.

Financial Intermediaries

Institutions that act as a middleman between savers and borrowers, including banks, investment funds, and insurance companies.