Karen hires a carpenter from a firm providing carpentry services,for remodeling the cabinets in her kitchen.She is unaware of the productivity of the carpenter who is sent by the firm.The carpenter,however,is perfectly aware of the labor hours required for the task.Which of the following problems is being faced by Karen in this situation?
A)A prisoner's dilemma
B)The asymmetric information problem
C)The moral hazard problem
D)The tragedy of commons

Question

Quizplus · Accepted Answer

The situation described is an example of the asymmetric information problem, where one party (Karen) lacks information that the other party (the carpenter) possesses. Karen does not know the productivity level of the carpenter and therefore, cannot accurately judge the labor hours required. This can lead to issues such as overcharging, delays in completion or unsatisfactory work.

Karen Hires a Carpenter from a Firm Providing Carpentry Services,for