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 in part from the fact that it is costly for an insurer to monitor the behaviors of the insured party.

Question

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 in part from the fact that it is costly for an insurer to monitor the behaviors of the insured party.

Quizplus · Accepted Answer

In adverse selection situations, it is rational for a seller with more information about a product to withhold information or provide incomplete information to a potential buyer in order to gain an advantage in the transaction. Therefore, the statement in option C is false.

Which of the Following Is False