Adverse selection and moral hazard are examples of
A) transactions costs.
B) information costs.
C) symmetric information.
D) financial market efficiency.

Question

Quizplus · Accepted Answer

Adverse selection and moral hazard are both examples of situations where one party has more information than the other, creating information asymmetry and increasing information costs. As a result, the uninformed party may face higher risks and costs due to the actions of the other party and may demand higher compensation or avoid the transaction altogether.

Adverse Selection and Moral Hazard Are Examples of