Economics of Money, Banking and Financial Markets, The, Business School Edition (5th Edition) (What's New in Economics)
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Chapter 8, Problem 17Q
To determine

How can the existence of asymmetric information provide a rationale for government regulation of financial markets?

Concept Introduction:

Information asymmetry occurs where one party has more information than the other. This information asymmetry leads to an imbalance of power in transactions which can further lead to market failure. 

Standard accounting principles are the principles that make it easier for investors to screen out good firms from bad firms, thereby helps in reducing adverse selection problem in financial markets.

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