In the context of market failure, 'Asymmetric Information' leads to: MCQ with Answer and Explanation

In the context of market failure, 'Asymmetric Information' leads to:
A. Zero transaction costs
B. Efficient market outcomes
C. Adverse selection and moral hazard
D. Perfect competition
Answer: Option C
Solution (By JKSSB Mock Tests)
Asymmetric information, where one party has more information than the other, can lead to adverse selection (before the contract) and moral hazard (after the contract).

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Practice More Economy Set 1 Questions

Question #1
The 'population density' in India is measured as:
A. persons per state
B. persons per village
C. persons per house
D. persons per square kilometre

Correct Answer: Option D


Explanation:
Population density is persons per square kilometre.

This question belongs to: Economy GK Economy Set 1
Question #2
The 'balance of payments' crisis of 1991 in India was partly caused by:
A. high exports
B. fiscal surplus
C. high foreign exchange reserves
D. high oil import bill and declining remittances

Correct Answer: Option D


Explanation:
The 1991 BoP crisis was triggered by high oil prices, declining remittances and low reserves.

This question belongs to: Economy GK Economy Set 1
Question #3
The 'Keynesian cross' model shows equilibrium income where:
A. exports equal imports
B. aggregate demand equals aggregate supply
C. money supply equals money demand
D. interest rate equals inflation

Correct Answer: Option B


Explanation:
The Keynesian cross shows equilibrium where aggregate demand equals aggregate supply.

This question belongs to: Economy GK Economy Set 1