In a market with asymmetric information,a good is said to have hidden characteristics if ________.
A) the consumption of the good imposes an additional cost on society
B) the production of the good generates additional benefits to society
C) the seller offers secret discounts to some buyers of the good
D) the buyer or the seller observes something about the good that the other does not

Question

Quizplus · Accepted Answer

In a market with asymmetric information, hidden characteristics refer to situations where the buyer or seller possesses private information about the quality of the good that is not known to the other party. This can potentially lead to adverse selection, where only low-quality goods are traded because the seller with high-quality goods cannot signal their quality to buyers.

In a Market with Asymmetric Information,a Good Is Said to Have