Which is CORRECT about information asymmetry and adverse selection Information asymmetry refers to the situation when buyers...

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Finance

Which is CORRECT about information asymmetry and adverseselection
Information asymmetry refers to the situation when buyers havemore information on the product than the sellers.
Information asymmetry is the result of adverse selection.
In a used car market, if sellers with good cars are unwillingto sell at a large discount, then only bad cars will get sold. Thissuboptimal outcome is so-called “adverse selection”.
Due to information asymmetry, market investors interpret firm’sSEO announcement positively because they believe insiders considerthe firm undervalued.

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a It is a correct answer information asymmetry refers to the situation when buyers have more information on the product than the sellers when twoparty dont have equal information called information asymmetry b Information asymmetry is See Answer

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Which is CORRECT about information asymmetry and adverseselectionInformation asymmetry refers to the situation when buyers havemore information on the product than the sellers.Information asymmetry is the result of adverse selection.In a used car market, if sellers with good cars are unwillingto sell at a large discount, then only bad cars will get sold. Thissuboptimal outcome is so-called “adverse selection”.Due to information asymmetry, market investors interpret firm’sSEO announcement positively because they believe insiders considerthe firm undervalued.