Moral hazard and adverse selection are examples of:
A)irrational exuberance.
B)asymmetric information.
C)adaptive expectations.
D)default risk.

Question

Quizplus · Accepted Answer

Moral hazard and adverse selection are both situations where one party in a transaction possesses more information than the other, resulting in asymmetric information. As a result, the party with less information may make suboptimal choices, which can create negative consequences for the other party.

Moral Hazard and Adverse Selection Are Examples Of