Question

How can the existence of asymmetric information provide a rationale for government regulation of financial markets? a). good information becomes quickly obsolete, b). the production of information to combat these asymmetries is subject to moral hazard, c). the production of information to combat these asymmetries is subject to the free-rider problem, d). the production of good information is so costly that all potential buyers of the information are priced out of the market.

Answer 1

Answer

c). the production of information to combat these asymmetries is subject to the free-rider problem,

The asymmetric information is an information one party in contracts knows, in the government regulation makes it punished then the chance of asymmetric information powers.