Chapter EMC, Problem 1MCQ

To determine

To choose: The option that is true with regard to private information.

Answer to Problem 1MCQ

The correct option is D i.e. it can distort economic decisions.

Explanation of Solution

Markets can handle situations in which not one person knows what is going to happen. So, markets have much more concern with situations in which some people know things that other people don’t have much knowledge of—situations involving private information (also known as asymmetric information). Private information can alter economic decisions and occasionally stop mutually beneficial economic transactions from taking place.

Private information is information that some people have and others do not; it is also known as asymmetric information.

So, the correct option is D i.e. it can distort economic decisions.