Which of the following problems are created by an information asymmetry
A)Moral hazard
B)Adverse selection
C)Both of the above
D)None of the above

Question

​Which of the following problems are created by an information asymmetry
A)​Moral hazard
B)Adverse selection
C)Both of the above
D)​None of the above

Quizplus · Accepted Answer

Both moral hazard and adverse selection are problems that arise due to information asymmetry. In moral hazard, one party takes undue risks or behaves inappropriately because they know the other party doesn't have all the information needed to prevent it. In adverse selection, a party with more information takes advantage of another party with less information, leading to adverse outcomes. Both are examples of information asymmetry, which leads to market inefficiencies.

​Which of the Following Problems Are Created by an Information

Which of the Following Problems Are Created by an Information