Which of the following statements about asymmetric information is true?

A) Asymmetric information occurs when one party to a transaction has relevant information to the transaction that the other party does not have.
B) Asymmetric information reduces market failures because it makes it easier for individuals to engage in transactions that in the presence of perfect information would take place.
C) Asymmetric information can only be solved through government intervention.
D) Asymmetric information occurs only in the market for used cars and in the insurance market.

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joncaleb cearley · Accepted Answer

Final Answer : A, Explanation :  Asymmetric information refers to situations where one party in a transaction has more or better information than the other, which can lead to an imbalance in the transaction. This concept is not limited to specific markets and can exist in various forms across different sectors, not just in used cars and insurance. It also can be addressed through mechanisms other than government intervention, such as signaling and screening.

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