1. Adverse selection is the problem of: one party to an exchange having more inf
ID: 1109487 • Letter: 1
Question
1.
Adverse selection is the problem of:
one party to an exchange having more information than the other party.
an offer conveying negative information about the product being offered.
an agent trying to exploit an information advantage in a dishonest way.
D incentivizing an employee to work in the interest of the owner.
2.
Hyundai Motor Company offered “America's Best Warranty” to signal that
other brands of vehicles were lower quality than theirs.
they wanted to sell more vehicles.
they had improved the quality of their vehicles.
they were selling low-quality vehicles.
A.one party to an exchange having more information than the other party.
B.an offer conveying negative information about the product being offered.
C.an agent trying to exploit an information advantage in a dishonest way.
D incentivizing an employee to work in the interest of the owner.
2.
Hyundai Motor Company offered “America's Best Warranty” to signal that
A.other brands of vehicles were lower quality than theirs.
B.they wanted to sell more vehicles.
C.they had improved the quality of their vehicles.
D.they were selling low-quality vehicles.
Explanation / Answer
Ans)
1.
B.
an offer conveying negative information about the product being offered.
Adverse Selection is that one party has information about quality that the other does not.
2.
they had improved the quality of their vehicles.
This helped to increase their sales.
C.they had improved the quality of their vehicles.
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