Which of the following is NOT an example of a solution to an adverse selection problem caused by the seller's having private information?
A)A list of award winners and top-tier producers is published by the organization of experts that judges an annual chocolate bar quality competition.
B)A hairstylist offers a free brief follow-up appointment within a week of a haircut to adjust anything the customer does not like about a cut.
C)A government requires miles-per-gallon labeling on all automobiles sold in the country.
D)A company makes sure that all its employees enter positive product reviews on an online website that reports product reviews.

Question

Quizplus · Accepted Answer

Option D is an example of a solution to a moral hazard problem, where the seller's actions after the sale cannot be observed or monitored. The other options are examples of solutions to adverse selection problems, where the seller's private information about the quality of the product causes information asymmetry and potential market failure.

Which of the Following Is NOT an Example of a Solution