Owners of defective used cars have more information about the condition of their vehicles than potential buyers of those used cars.This is an example of:

A) the moral hazard problem.
B) a spillover cost.
C) a positive externality.
D) asymmetric information.

Question

Makayla Conway · Accepted Answer

Final Answer : D, Explanation :  This is an example of asymmetric information, where one party (the owner of the used car) has more information than the other party (the potential buyer) in a transaction. This can lead to market inefficiencies and potentially negative outcomes for the party with less information. In this case, the owner of the defective used car may choose to sell it without disclosing its faults, which could harm the buyer.

Owners of defective used cars have more information about the condition of their vehicles than potential buyers of those used cars.This is an example of:

A) the moral hazard problem.
B) a spillover cost.
C) a positive externality.
D) asymmetric information.

Definitions

Learning Objectives

Learning Objectives

Related questions

Owners of defective used cars have more information about the condition of their vehicles than potential buyers of those used cars.This is an example of:A) the moral hazard problem.B) a spillover cost.C) a positive externality.D) asymmetric information.

Definitions

Learning Objectives

Learning Objectives

Related questions

Owners of defective used cars have more information about the condition of their vehicles than potential buyers of those used cars.This is an example of:

A) the moral hazard problem.
B) a spillover cost.
C) a positive externality.
D) asymmetric information.