Which of the following is a problem that could be raised by the fact that entrepreneurs have information about their business opportunities that investors don't have?
A) Investors have to make decisions based on limited information.
B) Since entrepreneurs have superior information, they can use it to obtain capital from investors and use it for their own benefit.
C) The existence of adverse selection.
D) A and C only.
E) A, B, and C.

Question

Quizplus · Accepted Answer

Limited information for investors is a problem raised by the fact that entrepreneurs have information about their business opportunities that investors don't have (Option A). Since entrepreneurs have superior information, they may use it to obtain capital from investors and use it for their own benefit, leading to moral hazard concerns (Option B). The existence of adverse selection, where entrepreneurs with high-risk businesses or poor quality projects are more likely to seek funding, is also a potential problem (Option C). Therefore, all of the given options are correct.

Which of the Following Is a Problem That Could Be