Question

A financial advisor has heard from a relative of NR Industries Inc.'s CEO that the company is planning to shut down its operations in Europe next year. The financial advisor realizes that this decision may cause a decline in the value of the company's shares and decides to sell them off. A buyer, unaware of the company's future plans, sees this as a potential opportunity and invests in the company. What does this scenario best illustrate?
a. network effects
b. experience-curve effects
c. principal-agent problems
d. information asymmetries

Answer 1

Answer: (D) Information asymmetric

Explanation:

Information asymmetric is basically refers to the economical transaction where the one party or any group knows more data or information as compared to the other party.

It is also known as information failure and the information asymmetric involves all the economical data or the information. The imbalance of the power occur due to the cause of imperfect data or the information.  

Therefore, Option (D) is correct.