Question

Asymmetric information refers to a situation in which __________.
A. a producer has product information that the consumer lacks.
B. producers and consumers have identical information.
C. a consumer has product information that the producer lacks.
D. producers and consumers exchange information.

Answer 1

Answer:

A. a producer has product information that the consumer lacks.

Explanation:

• The asymmetrical information is the information where the decision of transaction involves the two sets of parties and one party has more information than the other party.

• Hence is at an advantage and this created an imbalance in the flow and exchange of information and is a type of market failure. Its an extension of the non economic behavior, for example of the principle and agent problems, were the major cause is the misinformation.