Claudia went to a department store to buy a few things for her new house.She found that several items in the store were on discount and decided to make the most of the deals offered.However,when she started using the things that she bought on discount,she realized that many of them were defective.This happened because of the presence of ________.
A) positive externalities
B) negative externalities
C) asymmetric information
D) the moral hazard problem

Question

Quizplus · Accepted Answer

This situation represents an example of asymmetric information, where Claudia did not have all the necessary information about the quality of the discounted items before purchasing them. As a result, she faced a negative consequence (buying defective products) due to the lack of information. Positive externalities refer to benefits that spill over to third parties, while negative externalities refer to costs imposed on third parties. The moral hazard problem relates to a situation where one party takes more risks or acts recklessly because they are not responsible for the consequences.

Claudia Went to a Department Store to Buy a Few