Moral hazard results from _____ information and adverse selection results from _____ information.
A) private; private
B) private; public
C) public; private
D) public; public
E) None of the above answers are correct because both are the result of the lemons problem.

Question

Quizplus · Accepted Answer

Moral hazard occurs when one party has private information that the other party cannot observe, while adverse selection occurs when one party has private information about their own characteristics that the other party cannot observe. Therefore, moral hazard results from private information and adverse selection results from private information.

Moral Hazard Results from _____ Information and Adverse Selection Results