Which of the following is false?
A)Product liability laws can make it unprofitable to sell shoddy merchandise, providing a substantial incentive to provide safe products independent of government regulations.
B)Asymmetric information exists when the available information is initially distributed in favor of one party to a transaction relative to another.
C)In adverse selection situations, it is rational for a seller with more information about a product to provide a truthful and complete disclosure and make that fact known to a potential buyer.
D)Moral hazard arises from the fact that it is costly for an insurer to monitor the behaviors of the insured party.
E)Warranty agreements that limit the responsibility of the insurer in certain situations are one method of controlling moral hazard problems.

Question

Quizplus · Accepted Answer

Adverse selection situations occur when one party has more information than the other party in a transaction, usually the seller. Therefore, in such situations, it is rational for the seller to withhold information or even provide false information to the buyer from which moral hazard situations can arise.

Which of the Following Is False