If the agent has more information than the principal and there is only one state of nature,then
A)efficiency in both production and risk-bearing can be achieved.
B)only efficiency in production can be achieved.
C)only efficiency in risk-bearing can be achieved.
D)neither efficiency in production nor efficiency in risk-bearing can be achieved.

Question

Quizplus · Accepted Answer

When the agent has more information than the principal and there is only one state of nature, it is possible to achieve efficiency in both production and risk-bearing because the information asymmetry can be managed effectively, allowing for optimal decision-making and allocation of resources.

If the Agent Has More Information Than the Principal and There