When government mandates participation in a program to solve an information asymmetry problem,it is trying to prevent:
A)adverse selection.
B)moral hazard.
C)building a reputation.
D)illegal screening.

Question

Quizplus · Accepted Answer

Government mandates participation in a program to solve an information asymmetry problem is an attempt to prevent adverse selection. Adverse selection refers to a situation where one party has more information about a product or service than the other party, which results in a mismatch in the quality of the product or service being exchanged. By mandating participation, the government is trying to level the information playing field, thereby reducing adverse selection.

When Government Mandates Participation in a Program to Solve an Information