You have just graduated from college and are buying a brand new car. There are two on the lot: a green one and a blue one. Both have the same features for the same price. Is there a potential asymmetric information problem?
What will be an ideal response?
No, in this case both you and the seller know the same amount about both cars. While it is possible that one of the cars is a lemon and the other is a plum, they may also both be lemons (low quality) or both plums (high quality). The important thing is that neither one of you knows the true quality of either car, so there is no asymmetric information problem.
You might also like to view...
Suppose we have the following information about a furniture maker: furniture sales $100M, wood purchases $60M, wages $25M, tax on profits $5M, profits $10M. What is the contribution to GDP of this company using the product approach?
A) $100M. B) $60M. C) $40M. D) $15M.
Which of the following countries began liberal economic reforms during the 1980s and now have significantly more economic freedom than during the mid-1980s?
a. Ireland and New Zealand b. France and Italy c. Sierra Leone and Haiti d. United States and Germany
The foreign exchange market
A) is a government-run market where foreign currencies are traded. B) is a bank-owned market through which people buy and sell currencies. C) refers to the entire array of institutions through which people buy and sell currencies. D) an open market run by the Federal Reserve through which banks buy and sell currencies.
An ________ distribution of income would yield a ________ curve that was a 45-degree line between 0 and 100%.
A. equal; Gini B. unequal; Lorenz C. unequal; Gini D. equal; Lorenz