When the buyer is more knowledgeable than the seller,there is a(n)
A) moral hazard problem.
B) asymmetric information problem.
C) perfect information problem.
D) the lemon problem.

Question

Quizplus · Accepted Answer

Asymmetric information problem occurs when one party (in this case, the buyer) has more knowledge about the product or service being sold than the other (the seller). This can lead to issues such as adverse selection, where the buyer selects only products that are of lower quality, or moral hazard, where the buyer may engage in risky behavior due to the information advantage. The lemon problem is a specific example of asymmetric information, where the buyer cannot tell the difference between a good product and a bad one, leading to a market failure. Perfect information problem is not relevant here, as it implies both parties have complete knowledge.

When the Buyer Is More Knowledgeable Than the Seller,there Is