Which is CORRECT about information asymmetry and adverse selection 1. Information asymmetry refers to the situation when buyers have more information on the product than the sellers. 2. Information asymmetry is the result of adverse selection. 3. In a used car market, if sellers with good cars are unwilling to sell at a large discount, then only bad cars will get sold. This suboptimal outcome is so-called “adverse selection”. 4. Due to information asymmetry, market investors interpret firm’s SEO announcement positively because they believe insiders consider the firm undervalued.
Which is CORRECT about information asymmetry and adverse selection 1. Information asymmetry refers to the situation when buyers have more information on the product than the sellers. 2. Information asymmetry is the result of adverse selection. 3. In a used car market, if sellers with good cars are unwilling to sell at a large discount, then only bad cars will get sold. This suboptimal outcome is so-called “adverse selection”. 4. Due to information asymmetry, market investors interpret firm’s SEO announcement positively because they believe insiders consider the firm undervalued.
Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter22: Frontiers Of Microeconomics
Section: Chapter Questions
Problem 10PA
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Which is CORRECT about information asymmetry and adverse selection
1. Information asymmetry refers to the situation when buyers have more information on the product than the sellers.
2. Information asymmetry is the result of adverse selection.
3. In a used car market, if sellers with good cars are unwilling to sell at a large discount, then only bad cars will get sold. This suboptimal outcome is so-called “adverse selection”.
4. Due to information asymmetry, market investors interpret firm’s SEO announcement positively because they believe insiders consider the firm undervalued.
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Asymmetric information exists when two parties have unequal information.
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