Question

Mr. Smith put his laptop up for sale. He is aware of the fact that the laptop malfunctions frequently. However, none of the potential customers who came to buy the laptop were able to discover the problem and one of them actually bought it at a remunerative price. This occurred due to ________.

a) the selective retention of information by sellers the presence of positive
b) externalities the presence of negative
c) externalities the presence of asymmetric information

Answer 1

Answer: The presence of asymmetric information

Step-by-step explanation: In simple words, asymmetric information refers to the situation when one party to a contract have extra information regarding a subject than the other party of the contract.

Asymmetric information creates the potential of misconduct from the leading party as they can easily cheat the other party by concealing that important information.

In the given case, Mr. Smith was aware that his laptop is not working properly but still he sold its to a customer who was not aware of it. Thus, we can conclude that the correct option is C.