Market forces work more efficiently when
A)adverse selection is offset by moral hazard.
B)price is fixed rather than flexible.
C)buyers and sellers are altruistic.
D)there is an absence of private information.

Question

Quizplus · Accepted Answer

Market forces work most efficiently when there is complete and perfect information, meaning no private information known only to one party. This ensures that buyers and sellers can make rational decisions based on all available information, leading to a more efficient market. Adverse selection (when one party has more information than the other) and moral hazard (when one party can take risks knowing that the consequences will be borne by another party) decrease market efficiency. Price flexibility is important for market efficiency, but not more important than complete information. Altruism can potentially improve market outcomes, but it is not necessary for efficient market functioning.

Market Forces Work More Efficiently When