Which of the following is NOT an example of market failure owing to incomplete information?An employer does not fully understand the capability of the employees and hires them on a flat-rate compensation.A car owner does not share complete information pertaining to a prior accident with the car agent or the buyer.A health insurance buyer does not reveal the family history of diabetes to the insurance provider.The roommate of a chain smoker is prone to cancer because of passive smoking.
Question
Which of the following is NOT an example of market failure owing to incomplete information?An employer does not fully understand the capability of the employees and hires them on a flat-rate compensation.A car owner does not share complete information pertaining to a prior accident with the car agent or the buyer.A health insurance buyer does not reveal the family history of diabetes to the insurance provider.The roommate of a chain smoker is prone to cancer because of passive smoking.
Solution
The statement that is NOT an example of market failure due to incomplete information is: "The roommate of a chain smoker is prone to cancer because of passive smoking." This is an example of a negative externality, not a market failure due to incomplete information. The other three examples involve situations where one party has more or better information than the other, leading to potential market failure.
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