Which of the following statements is false ?
A)Asymmetric information can exist both before and after a transaction takes place.
B)Moral hazard occurs when one party to a transaction changes his or her behavior in a way that is hidden from and costly to the other party.
C)Adverse selection has the potential to eliminate some markets.
D)Asymmetric information only exists after a transaction takes place.

Question

Quizplus · Accepted Answer

This statement is false. Asymmetric information can exist both before and after a transaction takes place. This is because one party may have more information about the product or service being transacted than the other party at any point in time.

Which of the Following Statements Is False