Lucy, who has no mechanical knowledge of automobiles, takes her car to a mechanic because of a pinging noise in the engine. The transaction between Lucy and the mechanic is characterized by:
A) symmetric information with complete ignorance.
B) asymmetric information.
C) symmetric information.
D) complete information.

Question

Quizplus · Accepted Answer

As Lucy has no mechanical knowledge, she cannot accurately identify the issue herself, creating asymmetric information between her and the mechanic. The mechanic, on the other hand, has specialized information and knowledge about automobiles.

Lucy, Who Has No Mechanical Knowledge of Automobiles, Takes Her