Which of the following statements about the role of information in markets is true?
A)Situations involving incomplete information are always problems of asymmetric information.
B)Asymmetric information problems cannot be overcome without government intervention.
C)In the presence of asymmetric information, one party always uses the other party's lack of information to their advantage.
D)Asymmetric information becomes a problem when the parties involved have misaligned incentives.

Question

Quizplus · Accepted Answer

Asymmetric information becomes a problem primarily when the parties involved have different incentives, leading to potential issues like moral hazard or adverse selection. This misalignment of incentives, rather than the mere presence of asymmetric information, is what often causes the problems in transactions.

Which of the Following Statements About the Role of Information