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Reading Comprehension: Application Questions

Which of the following best exemplifies an asymmetry in available information?

Well done!


The student has used the furniture and is aware of its quality. The buyer, however, must rely on the student's advertising without any firsthand knowledge of the furniture.



Because of the nature of the product, neither the buyer nor the seller has information about the state of a watermelon. Therefore, there is no asymmetry of information; both parties are in the dark.



Because the buyer is allowed a trial period, he or she has an opportunity to assess the product's quality. Therefore, in this example, both the buyer and seller are aware of the product's quality.



Although the buyer is unaware of the product's quality, the seller is also unaware. If the product is immediately packaged upon assembly, the seller has no way of testing the product before its sale.



This answer choice makes it clear that the seller has information about the product's quality. However, if the seller can smell that the seafood is rotten, so can the buyer.

A student sells her quality used furniture by advertising it over the internet.
When a customer buys a watermelon, he or she cannot tell whether it is rotten inside.
Purchasers of computer games are allowed a trial period before the sale becomes final.
A buyer of new electronics cannot know whether they are defective because they are packaged immediately upon assembly.
Sellers of seafood know when it begins to spoil because of the pungent smell.