Scenario: Edward has inherited a house. As the house is far away from where he lives currently, it has been vacant for the past few years. A housekeeper is paid regularly to look after the house and keep it clean. However, because Edward seldom visits the house, the housekeeper does not clean the house regularly.
-Refer to the scenario above.The housekeeper behaves in this particular way because of the presence of ________.
A) asymmetric information
B) a positive externality
C) the free-rider problem
D) a negative externality

Question

Quizplus · Accepted Answer

The housekeeper behaves this way due to asymmetric information, where Edward lacks complete information about the housekeeper's actions due to the distance and infrequent visits, allowing the housekeeper to not fulfill their duties as expected.

Scenario: Edward Has Inherited a House