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

Asymmetric information refers to situations where one party has more or better information than the other in a transaction. Choices A, B, and D all illustrate scenarios where one party (financial advisers, restaurant staff, car dealers) has more information than the other (investors, customers, car buyers). However, choice C does not illustrate asymmetric information because it involves uncertainty about future events (stock prices next week) that is not known to either party in the transaction, not an imbalance in information between two parties.

Which of the Following Does Not Illustrate the Asymmetric Information