Author Question: Two consequences of asymmetric information are adverse selection and moral hazard. An important ... (Read 187 times)

audie · **on:** Jun 29, 2018

Two consequences of asymmetric information are adverse selection and moral hazard. An important distinction between the two is

A) adverse selection exists prior to the completion of a transaction while moral hazard occurs after the transaction is completed.
B) moral hazard exists prior to the completion of a transaction while adverse selection occurs after the transaction is completed.
C) moral hazard leads to an inefficient quantity while adverse selection leads to an efficient quantity.
D) adverse selection leads to an inefficient quantity while moral hazard leads to an efficient quantity.

Question 2

Refer to Figure 4-8. Suppose that instead of a rent ceiling, the government imposed a price floor of 2,000 per month for apartments. What is the value of consumer surplus after the imposition of the price floor?

A) 6,000 B) 30,000 C) 100,000 D) 240,000