Asymmetric information exists when
A) both parties to an exchange have all relevant facts about that exchange.
B) a good that is either nonrivalrous or nonexcludable is being sold on a market.
C) the two parties to an exchange differ in what they know about the good being exchanged.
D) neither party to an exchange is knowledgeable about the quality of the good being exchanged.

Question

Quizplus · Accepted Answer

Asymmetric information occurs when the two parties in an exchange have different levels of knowledge about the good being exchanged. This can create problems such as adverse selection and moral hazard, where one party takes advantage of the other's lack of knowledge. Choices A, B, and D do not accurately describe asymmetric information.

Asymmetric Information Exists When