________ occurs when one agent in a transaction knows about a hidden characteristic of a good.
A) The free-rider problem
B) The tragedy of the commons
C) Adverse selection
D) The moral hazard problem

Question

Quizplus · Accepted Answer

Adverse selection occurs when one party in a transaction has more information about the quality of a good or service than the other party. This can lead to the informed party taking advantage of the less-informed party, resulting in a negative outcome for the less-informed party. The other answer choices refer to different types of market failures that are not related to information asymmetry.

________ Occurs When One Agent in a Transaction Knows About