Explain what may occur when a buyer and a seller have unequal amounts of limited information. Describe two different types of problems that may arise when asymmetric information exists
What will be an ideal response?
Asymmetric information may lead to opportunistic behavior where the informed person benefits at the expense of the person with less information. Adverse selection may occur where the informed person benefits form the less informed person not knowing about an unobserved characteristic of the informed person. Moral hazard may occur if the informed person takes advantage of the less informed person through an unobserved action.
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The powers of the Federal Reserve System do not include: a. the ability to buy and sell U.S. government securities
b. the ability to extend loans to commercial banks. c. the ability to provide deposit insurance for customers of member banks. d. the ability to impose reserve requirements on both member and nonmember commercial banks. e. the authority to clear checks.
Price and concentration ratios are inversely related
Indicate whether the statement is true or false