If the market prices the shares of stock of two companies, one of high quality and the other of lower quality, are the same average price and potential buyers cannot distinguish the prospects of the companies:
A) The shares of the low quality firm will disappear from the market
B) The shares of both companies will trade on the market
C) The shares of the high quality firm will disappear from the market
D) This is an example of moral hazard and the shares of both companies will cease to trade
Correct Answer:
Verified
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