Solved

Pedro, Who Knows Nothing About Construction, Paid Benito to Remodel

Question 3

Multiple Choice

Pedro, who knows nothing about construction, paid Benito to remodel a room in his house. Two years later, one wall in the remodeled room crumbled because Benito used poor-quality materials. This illustrates which economic problem?


A) adverse selection
B) screening
C) moral hazard
D) signaling

Correct Answer:

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