The analysis of how asymmetric information problems affect economic behavior is called ________ theory.
A)uneven
B)parallel
C)principal
D)agency

Question

Quizplus · Accepted Answer

The theory that deals with asymmetric information problems and their effect on economic behavior is called agency theory. It focuses on the principal-agent relationship, where one party (the principal) hires another party (the agent) to perform some task on their behalf. Asymmetric information arises when the agent has more information than the principal, which can lead to agency problems such as moral hazard or adverse selection.

The Analysis of How Asymmetric Information Problems Affect Economic Behavior