Which of the following does not illustrate the asymmetric information problem?
A) Ordinary ﬁnancial investors do not know the motivations of ﬁnancial advisers.
B) Ordinary customers do not know how sanitarily the food is prepared in a restaurant.
C) Ordinary stock buyers do not know what will happen to the stock's price next week.
D) Ordinary car buyers do not know the actual quality of the various cars in the dealer's lot.

Question

Quizplus · Accepted Answer

While it is true that ordinary stock buyers do not know what will happen to the stock's price next week, this is not an example of the asymmetric information problem. The asymmetric information problem refers to a situation where one party in a transaction has more information than the other party, which can lead to adverse selection or moral hazard. In this case, both buyers and sellers of stocks have access to the same publicly available information about the company and its financials, so there is no asymmetry of information.

Which of the Following Does Not Illustrate the Asymmetric Information